I'm taking a temporary break in conference coverage (don't worry - there will be more next week) to poll some of the smartest people I know (that's you, SEOmoz readers), about an issue that's been keeping Gillian and me up plenty of nights during the past 3 months.
SEOmoz is at a tipping point of sorts - we've gone from being primarily a search marketing consultancy business to one that's heavily focused on an SEO product - premium content & membership. In the 6 months since launch, we've had approximately 1800 people sign up for our premium membership, of which ~1200 are members today (looking at our subscriber details, it appears that many folks will sign up for one month, cancel, then sign up again 3-4 months later).
Right now, SEOmoz membership and content isn't for everyone. If you're someone who regularly works on multiple site campaigns, the tools are terrific. If you need a little bit of strategic consulting or experienced professionals to bounce ideas off, the Q+A is great (BTW - sorry for my slower than normal responses due to the conference). Even novice search marketers can get a lot of benefit out of the guides & tips. However, there are certainly folks for whom premium membership isn't a terrific value - our goal is to change that.
We've recently been working with a venture capital firm, thinking about investment from them, as well as considering other options like private financing. Why? Well there's a lot of things we want to do, like:
- Cool new tools
- More experimentation & reporting
- Greater tracking abilities for member websites
- More premium guides
- Marketing & advertising
- 70+ specific projects that are probably very unwise to share publicly
To do this, we need to hire more people, add hardware, grow our marketing budget & put investment into R&D. Inside SEOmoz's offices there are two extra-large whiteboards, filled to capacity with all of the products and services we'd like to launch (both free and premium). At our current development rate, it would take between 18-24 months to roll out all these great ideas, but with investment capital, we think we could probably do it in 6 months. Not to mention the fact that we come up with about 10 great ideas per week that generally go on the shelf.
We're looking at our financial & growth projections and thinking that something between $750K and $2million (for something between 10-20% of company ownership) should take us where we need to go at this point. While this is a rare amount for VC participation, we've had some interest even at this small level.
And so, the question fundamentally becomes - do we take outside investment and grow fast, scale up and use marketing to expose more people to premium content? Or, should we continue to grow slowly, reject external financing and keep a tight marketing budget?
Pros of taking outside financing:
- Build content/tools/services more quickly (with more people)
- Have funds to conduct marketing activities
- Build greater formalization into the company
- Form relationships that may help the company achieve goals
Cons of taking outside financing:
- Give up some portion of control of the company
- Experience pressure to accelerate growth very quickly
- Lose a percentage of financial benefit from growth
- Invest significant time in appeasing and working with a board or investors/directors
What do you think we should do?
p.s. Yes, I know you're never supposed to share this stuff outside the company, but that's what makes us different :)
I've told you this time and again, but never on the blog, so here goes:
These things you do: soliciting information, posting opinions, revealing the inner workings of your company? Gone. The freedom you have, the ability to change and adapt, will be gone. I'm not saying great things won't happen, but they won't be happen to a company that's exclusively yours. You won't make the calls anymore, and I think you'll be very unhappy.
well said.
You know him best I guess mystery_guest...
Rand: trust me: if your wife says no, and you still do it, you'll regret it for the rest of your life... (And I happen to agree with her :) )
Somehow I think this response carries a lot more weight than the rest. :)
And well it should.
And, Rand and Gillian, this:
"70+ specific projects that are probably very unwise to share publicly"
is a kind of thinking I've hardly seen here before. If that's what VC's will cause, it's not worth it.
Yes, we are tapping our toes for him to address this.
Thanks, Jill. I know it's not really my place to discuss any of this - I'm just basing my concerns on what I know Rand is like, and the sort of work environments in which I think he'd be unhappy.
As you should! It's Rand taking it out in the open so I don't think he'll blame you for replying in it :)
Sorry to all the other mozzers, but SEOmoz without Rand is not quite SEOmoz. And if there's even the slightest chance of him being unhappy after this, it's just not worth the risk, IMHO.
My thoughts exactly, MG.
SEOmoz is what it is because you guys can follow your own direction. We'll be fine if it takes two years to release all your awesome new tools. :)
I'd personally rather see you guys take it slow and steady, and retain the personality of the company (as is), than crank out some great stuff and lose who you are.
Great comment Mystery Guest,
Can I just say how jealous I am of your company and its leadership?
Couln't have said it better... I work at company that was privately held and then went public. Overtime, the atmoshpere changed completely. Its already been written here, you have to look at your long term goal. I am fairly new here, and I can honestly say, I was astounded by the ease of access to get help and information but more importantly, everyone's willingness to help is incredible. Sometimes, that doesn't fit with the bottom line.
Another thought.... what about offering premium membership for more than 1 year? I would do it.
I think get ahold of Jake Baillie - he is doing small scale VC funding and would be someone who knows enough to keep his hands out.
Once you go down the investor road there is usually the need to go public or sell out to someone.
Jake may just go for a ROI.
Do what you enjoy! That is the first rule. If you drag your bumbershoot to work everyday then you will accomplish less than if you run there every morning and whistle while you work. :-)
Keep an eye on your competition. That's the second rule. Having said that... you must face the competition. If you do not feel competitive pressures currently then you might be safe to stay the course. But if the hounds are after you (or you are the hounds - which can be great fun!) then some investment to buy reinforcements might be a fine thing.
How much pressure do you want? This goes back to answering the First rule... Some people do a kickass job when the heat is on. Some people want to grow fast so they can be "The Man" (you already are The Man in my book). Is that what you (and your team culture) enjoy? If this is you then grab the money.
But some people work best when they can work uninterrupted on writing, creative work and preparing for their presentations. If that is you and you enjoy this now then stay the course... otherwise you might find a person who can fight on the front lines while you do your planning in the general's tent.
No matter what... listen once to Bob Dylan's song... "You gotta serve somebody"
I definitely advise you not to give up shares of your business. If you feel confident that you can capture a large number of new premium subscriptions in 6 months then you should be able to get financing (from a bank) without giving up interest in Seomoz. If you can't get a bank loan then see if you can get the money from venture capital and repay them in 12 months at X% without giving stake in your business.
My fear is that your business philosophy will not withstand corporate interest who would be shocked if you disclosed the kind of information you are renowned for sharing.
I say keep the Moz in Seomoz!
Excellent point regarding the free sharing of ideas and tools here. Many investors could have a problem with that aspect of your business. Of course since many of the tools are only available to premium members that might not be that big of a deal but they may want to limit what you write about or the free tools that are offered.
My thoughts exactly - do what you need to do to keep complete control - even if it means you grow a little more slowly 'cause you can't get as much from a bank as you can from VC...
Ever consider letting the mozzers invest?
Now thats an idea! With all the social lending & investing sites available, such as:
https://www.sellaband.com/
https://www.prosper.com/
https://www.homeequityshare.com/
I am sure there are plenty of mozzers that would be interested in investing.
Now, that would be a much better way, in my opinion.
Funny you should ask.....
I be all for it gillian if you're thinking of going that route. I'm a small investor, email me if you want to know how much I'd go in for.
I like this route... More thoughts below...
I'd say it depends on where you want your future to be in regards to SEOmoz. If your ultimate goal is to build the company up and sell it off, then obviously the funding is the right way to go.
If the goal is to do this pretty much until you can't do it anymore, then you'll be much happier without the pressure from private funding, and your members will be much happier because there is definately a drop off in quality when you start moving to a more corporate like enviroment.
Good luck either way!
I agree with Parks. It depends on if you like what you're doing now (a lifestyle choice), or want to grow the SEOMoz brand/business (business reasons).
In 18-24 months adding two white boards full of new ideas to keep the current growth rate (i.e. keep the current level of success) is pretty reasonable. If you like doing this as a lifestyle choice, then awesome! Tell the VCs, "Shove it. I won't sell out to the man!"
On the other hand, maybe you're looking to grow at a meteoric rate, and to serves your growing user base really well, beyond what you've got today, tomorrow, or 18 months from now. How can you do that with a small staff, small hardware investment, and, (forgive me if I'm incorrect), without the experience of investors which have been through multi-million dollar (wherever you're at today times ten or more) business transformations before? I think accepting VC funding makes the most sense for business reasons, especially if you can get a good valuation.
This is just an inexperienced, but educated guess: I think you'll find that investors will constrain you, but will also guide you to business success in ways you might not have thought of or wanted to do in the past. Them having a ton of cash on the line and an expectation of a huge ROI ASAP will force you to execute.
Try reading Marc Andreesen's blog posts about VCs. Having done it several times, for business reasons I think, rather than lifestyle choices, he lays it out pretty nicely.
Why are you in business? Is your prime reason for being in business to make money, meaning accumulate wealth to a degree greater than you would working for other people? (That's the reason most people are in business.) If yes, then take the money, because the VC firm will help you achieve that goal. And making money is also their reason for investing in businesses.
But if your goal is simply to do what you enjoy, and make enough money to allow you to keep doing that, with accumulation of wealth as something nice but not that important, then don't take it. Because then your goal and the VC's goal are different, and that's a formula for conflict and problems.
Best comment so far, read it over guys :)
If you're thinking of taking VC funding primarily so you can get products out quicker, I would just caution that one doesn't necessarily lead to the other. I've worked with a lot of software development teams (as you know, I'm very old) and more people doesn't always mean faster releases. I'm happy to talk with you more about the different experiences I've had, if you'd like.
Vanessa beat me to the punch. You've got a great team that you've built up carefully; taking in cash doesn't guarantee you building the things you want to build in six months. Hiring takes time, and hiring well takes a lot more time.
I worked in a consulting role with Office.com during the dot-com heyday. The were funded by CBS/Viacom and were rumored to have spent $80 million on their launch, hiring hundreds of people in the space of a couple of months. Most of their people I dealt with were underqualified and overwhelmed (and the end result attested to that).
Of course, that's a completely different scale than what you're operating on, but the point is that having double the money won't mean double the productivity, especially in the short-term. When you're in the service industry, ramping up production isn't like cranking out widgets.
I don't think we will be nominating you for Grandmother of search....
Good advise from someone so young!
I'm on the business versus lifestyle vote. If this is just a business for you and will sell it when the time is right, go for VC. But if this is your baby, your heart and your soul, don't. It isn't wise to sell your soul. Not even alittle bit of it.
I just wanted to thank all of the many people who've left comments here - it's an overwhelming feeling to have so many people care so much about this brand that we've built.
You are all right - SEOmoz is more than an SEO company, it's more than an investment - it's a community and a culture and the very best parts of it might be put at risk by outside investment.
However... That risk also carries the possibility of great reward - growing this community into something even bigger, more exciting and more compelling. There are a handful of exceptional minds that we'd love to bring over to SEOmoz and a number of high return marketing investments that we believe could expose the brand to an even wider community.
We would NEVER accept outside financing if it meant:
BTW - I really appreciate the private input that's come through email as well. I'm a little swamped inside my inbox right now and still shaking off a nasty cold I caught in SJ, but I should be back up to speed on Monday.
Sorry I was late to the conversation, Rand. I would love to chat about it at some point when (if??) we both have the time - as Duncan said above, we've been pondering the best way to grow (for ourselves and in this industry) and the ideas that fly around are great for talking through over a beer.
This debate, which we hear alot, is just too web 1.0. (yeah, i know, flog me for that comment)
Be more creative -- you're SEOmoz! Find more creative ways of earning or amassing capital than sticking to such an arcane industry as VC is. I know you can do it.
My wife and I have also been talking about this a lot, we have done a lot with our site over the last 2 years but we are now at the point were we can not do any more on our own. Well we can but not fast enough.
The site covers its cost now but to take it to the next level we need investment we have already mortgaged the house to get this fare but with only 2 of us it’s getting impossible to manage.
So as my wife says nothing of northing is nothing meaning if we carry on the way we are we could go under as we can not manage on our own, and we can not do the advance’s we want to the site also.
Or we loose 10 – 30% of the company to a VC and they put in £100,000+ and we can then take on the 5 staff and get a bigger office. It also means we could get more suppliers on board and double our product line to 20,000 so we would be one of the biggest online shops in the UK.
After weeks of talking and talking to family we have said yes it’s worth it.
Good luck I am sure you will do well even with out VC help
Even though 20% may not seem like a large percentage you would be giving up a portion of the control of your business. If you can generate the investment through other channels I would go that route first. 9/10 business owners start their own venture because they want to be in control of their own future.
It would be interesting to hear what the staff at SeoMoz think on the subject?
Of course which ever way you go you should hire me to be your New Media & PPC expert (seriously).
I like the idea of shoemodo to let the mozzers invest...
Other than that I think it totally depends on your goals, like most of the people here already said.
If it comes down that you decide based upon your feeling, try to convince yourself that you'll take VC money and see how you feel, than the other way around and see which decision made you feel better.
A good read is "Founders at Work" which is a lot about startups getting funded. A negative example would be ArsDigita who took 38m. and crashed a few months later because of conflicts between the founders and the VCs.
Three questions come to mind for you to consider.
1. What is the exit strategy? A venture capital fund is a limited partnership between the venture partners and the limited partners (the investors). The fund has a lifetime, for example ten years. By the end of that period of time the fund unwinds in some way, returning the investment plus the return to the investors. Typically the fund realizes a return by selling the company or taking it public. If you are planning on doing either of these in the next 5-7 years, then VC money might be for you.
2. Who runs the company? If you capitalize the company for faster growth and the investors are happy with your management of this fast-growing company, great. But if you hit some bumps in the road and they become unhappy, they will need to make some changes in the management structure, including the CEO, in order to keep their investment on track. One benefit of having less capital and thus being forced to grow more slowly is that you will have more time and a better chance of working through your "growing pains".
3. What return are the investors expecting? I think the expectation of venture investors is 10x return on their investment. If your growth model supports their expectation, then you have good alignment.
An entrepreneur has to think carefully about whether the interests of the investor and the entrepreneur are well-aligned. Joel Spolsky has written about this much more clearly than I could, so I'll refer you to his article about venture capital.
Good luck.
I think private investing with a payback plan would be the better choice for something short-term like this. Remember, once you give up part of the company you can't leverage it again later if you really need it for medical emergancies or that idea that will make you millions.
Using a VC for a short-term operation seems like using a bazooka for a flyswatter.
MHO
If you think 10% is worth around 750 K and a VC is willing to do that, that values your company at 7.5 million. Shouldn't be any problem to get a loan from a bank then I would say as your cash flow would have to easily be good enough to cover that. I would go for that option if I really felt it was going to pay off to make that extra investment. Then again, you could just borrow less (or none) and grow a little less quick. Personally that's what I'd prefer all the way. You don't end up putting all your bags in an expensive basket that way and can adjust as the market changes. Or sell out altogether and start something new :)
Rand,
I thought many people will advice to shy away from VC funding as I was reading the blog. And my prediction was correct. If you are only looking for 750k to 2 million, I would not worry about vc funding in the first place. It is not too difficult to find an angel investor who can put up that kind of money. I think if you set up some ground rules on what you will accept and what you will not, things can get a lot easier. The biggest challenge in finding an investor is choosing the right one for your company. Someone who will appreciate the way seomoz does things.
I've been on both sides of this debate in success and failure. The funny part is that the succes actually became a failure in terms of choices and lifestyle.
Taking the money. I was part of a company that took the money in 2001. We grew, expanded, and had a lot of great times... for the first year. At that point, the investors were not happy with the results and made drastic changes that cost us control and ultimately the jobs of many people. I was one of the few people that survived the period, but it was very difficult.
Not taking the money. After that experience, I started a company and completely bootstrapped it. We had low overhead and didn't run out of funds. However, we never had the ad budget or people to really make a dent in the market and ultimately, didn't survive.
Your position. Your company strkes me as that is really in the driver's seat to grow organically. You have a loyal and passionate customer base and you have the freedom to speak freely (like your post on this topic, for example) without having to report to shareholders. Though this is, of course, your decision, I believe that you guys have all the tools, team, and support to do it on your own. It might not come as quickly as it would with a $2M investment,... but it's all yours! Anyway, that's my 2 cents. Looking forward to the seminar this fall.
I echo RustyBrick: "I wouldnt let a VC in. :)"
We know that you are a whiz of a (SEMarketing) whiz in yellow Pumas (extra credit if you have a shoe endorsement).
We know that you, and Gillian, have built a quality organisation.
We know that you, and they, have ideas like bunnies have, well, more bunnies.
We also know that you aim high (a certain 'will you...' commercial comes to mind) and want to accomplish everything NOW, everything EXTRAordinary.
May I suggest what you really need is patience. And shoe-brakes. Shoe-brakes are very different from VC-steering. And VCapitalists do tend to backseat drive.
I echo mystery_guest: "You won't make the calls anymore, and I think you'll be very unhappy."
You know your business model best: will sufficient opportunities be missed to justify giving up n-level of control? I suspect that that for every opportunity 'missed' you and your crew can imagine n-replacements. Bunch of bunnies.
Let's examine your finanacing 'pros':
* hire more people sooner. Potentially valid reason.
Are you absolutely sure that all gizmos within 6-months rather than over 2-years is an absolute business necessity? Or just a nice thing?
Do you know the maximum rate you can select and train and innoculate new staff with the SEOmoz culture while maintaining existing service levels? Does that rate provide all gizmos within that 6-months?
* marketing. Are you kidding?
* increase company structure. Poor reason.
This should already be detailed in your business plan. Also which position needs to be activated and filled at what business milestone.
Financing would accelerate administrative formation adding immediate cost overhead and drastic organisation social change at a time you are trying to bring new staff up to speed. Extreme culture clash for you and for them. Disaster potential without very careful planning and implementation. And the clients, what about the clients?
I suspect this thread is comment-link-bait prior to announcing some sort of individual buy-in to finance growth. The source and distribution of financing may affect command and control but not the pitfalls of too rapid growth.
Be careful out there.And best wishes.
>>extra credit if you have a shoe endorsement
Drop the Pumas and let me hook you up with some smooth retro New Balance kicks Rand.
That's a tough one. But, from what I know of SEOMoz, it seems like you have put your heart and soul into the company and take pride in how things have grown. That being said, I agree with many of the other commenters who say that adding a VC to the mix adds a ton of pressure and I envision you will spend less time doing what you want to do and more time trying to please the new part-owners.
It all depends on the VC you plan to work with. Some trust the company they invest in and will step back (for the most part) and let you do what you told them you would do. Others sign the check and then step in to remind you that they are paying the bills - hence the added pressure.
My recommendations - take a year and see how you grow organically and then reexamine the VC avenue. Especially since there is all this talk about Search Marketing evolving in the next six months.
Just my two cents, which, with inflation, isn't worth as much these days! Good luck - we're with you either way.
I am going to surprise people with this.
I think you should take the money.
I trust that if Rand is going to make a decision, a big factor will be that he feels comfortable with it. I am quite confident that he will come to the right decision and retain the good things that make SEOmoz so special.
I have no feelings like "SEOmoz is selling out" or something. I am all for them getting the funding they require.
This isn't just because you hope they'll have a bigger alcohol budget for parties, is it? =)
Rand, one comment... but different from all of the above...
You might consider taking venture capital for PROJECTS. They have a stake in the project only - not your entire biz.
I'm sure you've thought about this quite a bit already, and it seems like you've answered the first question: you know what you'd do with the money. My primary concern, though, is that six-month timeline. Ramping up production, hiring good people, and getting them integrated, let alone getting them to chip away at your whiteboard full of projects, even if they get everything right the first time, is probably more like a 12-month process.
Another totally unrelated concern is this: think about the attitude of VC towards SEO/SEM (Jason Calacanis comes to mind). Someone looking to invest in an SEO firm may have very unrealistic expectations about what SEO is and the kind of growth you'll be able to achieve. They may also see your membership model and have completely wild delusions of other social networking sites (Facebook, etc.). If you do pursue an investor, you'll need to vet them even more carefully than most firms do.
I referenced this above, but in today's economy with a potential debt crisis occurring, with credit terms being tightened for a wider realm of activities, (not just mortgages) I would be loathe to borrow and would be very wary with regard to VC's or angels.
In either case, the investments may be equity (cash) but the investors may be heavily leveraged elsewhere and affected by a potential vast credit crisis which is just beginning to emerge and spread beyond the mortgage markets.
The indications are that this credit problem will be much worse than what happened during the first crash of the dot com period.
I first hand experienced the much larger debt crisis of the early 90's. Its a bad experience to work with intense pressure on your borrowed money.
just my $0.02
As someone above mentioned, if you Go VC, it's an all or nothing proposal. I would say go for it, but I'm an all or nothing kind of guy. You have to dream big to make it big.
What's the worst thing that happens? Everything explodes and you start up another consulting firm and go back to what you love? Doesn't sound like the worst thing is all that bad. And the best thing? SEOmoz becomes "the" source for search engine marketing (or internet marketing in general) information, education, and execution on the web.
I'm a big fan of this way of thinking (and I agree). Our coach has been saying the same thing to us recently - hence our 2 new employees (from 3rd Sept) and bigger offices (asap). We are funding through cashflow and a little debt initially, but have been considering accelerated options.
We have just gone through these thoughts/worries at Distilled (on a smaller scale). We wanted to grow faster, and do more exciting things.
Personally I couldn't stomach the thought of giving away part of what I have spent 2 years of my life building.
We ended up doing what I hope will be the best of both worlds. We hired the staff (they start v soon) with money that we have borrowed from our family. We get to grow fast and to keep complete ownership over our business.
There is a niggle at the back of my mind, that having outside investment would make things take off much quicker, but my gut feel is that I would hate being answerable to someone else.
Its been said before, but I'd listen to MG. My fiancee would have said I wouldn't enjoy outside funding, and she'd have been right. She knows me better than I do, and I'm sure its the same with MG.
Having said all that, I don't think you can make a wrong decision. You guys have such a good ethos, which gives you such a good following that us on the outside will go with you whatever you decide to do.
I commented above before reading all the way to the bottom, and D told our story before I did.
The option we didn't have in front of us (though we did toy with similar ideas) was the micro-finance route - I think that's really intriguing.
Also, I don't think the alternative is just not to put the money in and not to be able to grow as fast as you'd like - it's just not to sell a share to a VC. There are other routes...
Eventually, if you want to have bigger accounts, you are going to need finance or you'll need to sell the company and retain some role as a CEO or CTO.
I just don't see how focusing on premium memberships will allow you to grow that fast in 3-5 years. Isn't that focusing too much on premium services, rather than expanding your business to attract bigger clients?
Isn't the golden SEM those big accounts, just like in adverting? Don't you ever wish you could have a Nike or a GM?
I don't really know how things work for SEO companies in the US, but from what I've read, it seems like the big boys live inside big communication groups.
I must agree with the others who propose a loan vs. VC money. The moz would be lost and would become SEOmozless. It just sounds like you need a loan and not a business partner who would want to sell the company in the future anyways (and don't believe that you could just easily buy back their share).
I'm a veteran of the 2000 dot-com implosion; the company I worked for was destroyed by giving over its future to private investors, who then ordered the dismantling of the original owner's vision and the firing of over 100 people. The remaining company was nothing like the original vision -- just profitable for the investor.
That's why I would say grow at your own pace, but under your own total control. Maybe take a loan, but don't give over any control of your company to outsiders who don't truly share your vision.
The gap between 6 months and 18-24 months to reach your goals is really not that big, and if you truly have over 70 great ideas, then why think you have to get things up in 6 months? Your audience really can't absorb a ton of new things in just 6 months, anyway -- we're already overloaded with rapid change in the SEO world as it is!
Rand it's a difficult question for me to answer. I certainly see the benefits for being able to create tools quicker and have more money for marketing. And 10-20% doesn't seem like too much too give up. My worry would be how SEOmoz night change having to answer to investors.
I'm so far from someone wanting to invest that kind of money in me that I can't honestly say what I would do. The idea of giving up control of my business isn't appealing to me, but were someone to offer me finacning for some things I want to accomplish and I thought that financing would benefit me and the company I might take it.
In the end I'm here because of the quality of content SEOmoz provides. If that quality is maintained with outside investment I'm still here and I'm still coming back. If the quality declines I go elsewhere regardless of the who's financing what and who owns what percentage of the company.
All depends how you want to live vs. what you want to do with SEOmoz vision, growth and culture-wise, man.
As for the need for scaled-up, increasingly efficient and reliable tools - including types that simply don't exist yet at all - and other important things, of course those are very real and SEOs struggle with that daily. Some of us as you probably know, purchase multiple licenses/subscriptions of our preferred tools - yours or otherwise - when we have to work around scale issues particularly. And of course some of us, with discretion, develop our own tech to apply to them to that end as well. So if you're thinking about scaling up, trust me there are those who would certainly make use of that, taking whatever SEOmoz can dish out in terms of capabilities. Some of your customers (ahem) to you are like Google's buying DoubleClick: Of course the culture and best practices, whitepapers etc. content are all good. Our real lifeblood though is often ability to get, process and interpret sheer data, bulks of it and when we need it, fast (all at once and instantly, ideally). Many times I've wished I could just upload a big list of X to you guys and say "tell/forecast for me when you'll have Y reports ready for me to download on all of these," for instance. Some of us hunger for raw information no less than the engines we optimize things for. So we're prone to using your tools aggressively as they're among the more accurate and least buggy of those on the open market.
Think about how that kind of business step would change your vibe and the demands that new growth plans would put on staff, and how it would all change the culture not just of what SEOmoz is but also the deals-size levels on which you'd maybe start to play on in terms of business and accounts development. If you lost your boutique vibe your services might move away from individual offerings and more toward things like scoping multi-year, multi-lingual program pushes for large companies and all their subsidiaries for example. Because your competition would be their in-house teams, you'd have to move in that direction probably, and that might change your group a lot. Consider what service types you're maybe not offering yet but might want to. Also consider how much of your revenue model would be based on that services end vs. the tools and content end. The more it would be about the former vs. the latter, the more it would affect SEOmoz's identity. Also consider how potential trade-offs of work product quality vs. quantity. Aggressive growth mode can make it easy for the issue to sneak up on companies when new hands enter into the pot.
Hope that helps. Having worked boutiques, startups and big corporate I won't pretend I have a firm opinion in SEOmoz's case. Just visions of trade-offs either way.
NO VC.
They will change SEOmoz and thats what makes you guys so great now...your different.
I am a big fan of SLOW GROWTH. I worked for a nonprofit that experienced tremendous growth after being featured on Oprah. It was nice - for a time. But then the buzz slowed down and they're stuck in a cycle of layoffs/hirings/layoffs/hirings.
I'm also a proponent of keeping control over your business. Just this morning my husband and I were talking of this. We both ultimately want to make a living as filmmakers, but we don't really want to get sucked into Hollywood and lose creative control. The biz is notorious for not giving consumers what they really want, so we're trying to think innovatively.
My guess is that a lot of the content you write about comes from testing and working with clients? There are so many things that you only discover by actually doing the work.
Rand --> If you move away from client/consulting how do you plan on keeping your edge and producing "premium content" that is at the forefront of the SEM industry?
We could hold a benefit for seomoz during PubCon..... or Rand you could just bring a bunch of money and blow off the sessions and just hope you do well at the gambling tables....
even if you lose at least they will comp the rooms!
I'm sure there is someone / some group in your extended network who could provide the funding you need without having to go the VC route.
This post Sphunn here: https://sphinn.com/story/3654
Read Seth Godin's book The Dip. That is where you are. You are already one of the leaders in your field...go for it...expand and become even better.
My gut says exercise patience and just say no to VC.
But then again, I've got trust issues. Ultimately your call. There was a pretty good article in a recent AdAge comparing companies that handled rapid growth well, and companies that handled it poorly. Might be worth a look.
Hi Rand,
Having worked for VC backed company during their 80 to 800 employee growth phase, I thought I could add some unqiue perspective.
The first question you need to ask is what kind of entrepreneur are you? By that I mean do you want to grow this company forever or do you want to start multiple different ventures in your lifetime. Venture capital will want you to have "an exit plan" that makes sense to them. 9 times out of 10 this means acquisition by another company. Is this an outcome that you'd want?
If the investor does not understand the unqiueness and/or true value of your business and what it does, you are inviting a potential problem. Additionally, does this investor bring relationships and/or experience to the table in this regard. In your location, there might be angel investors who would make better partners if you plan a sustainable long term business.
What efficiencies would this capital create?
What kind of leaders would you want on your diversified board and why?
What constraints are there to your growth? Scarce resources? Ability to scale tasks consistently?
Are you prepared to have a more process driven culture? To scale with lots of new employees, this is mandatory to maintain quality of experience.
Why the limiting belief about raising smaller amounts of capital? (I sent you email privately to discuss this in more detail).
Other resources:
Dick Costolo's blog
Matt McCall Gives Venture Capital Investing Tips at Barcamp Chicago
Rand and team:
One of my recommendations would be to consider if a middle ground approcah would be better for you, that being instead of going full out for VCs to attract one or two Angel investors.
Often times with Angel investors you do not give up a lot, or even any control. Many Angel investors would be hapy to contribute to your "board" and help not only with cash but contacts and expertise. They usually "risk" with their own money and therefore tend to really get what you are doing and believe in it long term, otherwise they wouldn't put *their* money into this.
Angel investors tend to do smaller amounts, anywhere from $100K to I guess as some said upto a few mil, or perhaps as a group of a few fellow Angel investors. I agree with Khalid's post that you shouldn't have any problems finding these.
Personally I am in a similar boat, I have run music services online as a small company with thousands of premium subscribers, yet myself am still hesitant to go the VC route to expand. If I do in the short term, I'll definitely make it an Angel so I can just deal with one person directly. My initial experiences with some VCs who were poking around is that they can be quite sleazy too. Some BS you to get more information for their competing ideas, while others turn out to already have alterior plans for "harnessing your experience" and making it work towards their ideas, and not the ones on your two whiteboards. They are all nice at first, just watch your back :)
Take the money. No one out there has all the ideas SEOMoz has, but hundreds of people have 1 of the ideas. How many of them will beat you to market because they have 1 idea to focus on and you have 70?
No VC. How about turn some of your ideas into development contest(s) for premium members? You'll let some ideas out-of-the-bag. But hey, you're doing that anyway.
If you stand barefoot in a grass field, watching the sun rise and wriggling your toes in the morning dew, the answer will come to you.
And I think it will be a "no". You love what you do, you do what you do best and another company wouldn't let you do what you know you want to do and do best.
(The above method of barefoot toe wriggling answer-finding actually works)
Two things - doesn't matter how much money anyone invests - there's still only 24 hours in a day, never, never enough time (even internet time!) to do even half the stuff we could/want to do.
secondly my favourite UK network went down the investment route, now they're not my favourite because they've lost that personal touch and gone all corporate - the staff now don't have the time to be friendly and they're mostly stressed with targets and being driven by the 'suits'.
Don't take 'being happy' for granted - it's one of the hardest things to get back!
I'd agree with the majority of comments on this post: don't sell out to VC, but if there's an angel investor who understands your goals & the reasons you want the money, that's probably ok because he/she is going to be more likely to let you maintain control.
Selling microshares to mozzers is also a great idea; there's great potential to raise the kind of money you're talking about in small chunks from premium members...as well as increasing the 'moz' association with your brand. And if you're looking for marketing, I can't imagine a better PR story among major media outlets than a web company that does something as un-traditional as that to raise money.
Rand and Gillian, I think it's admirable that you ask your users for their opinion. I think they've provided some valuable insight. Certainly, they are passionate about this site and for good reason.
But, with the exception of perhaps 3 posters, few people have 1st hand experience with VC funding. I'm not counting people who worked for firms that took VC funds. I'm talking about the people who got the checks and signed the papers.
I think it's very important that you ask this same question to people who also took VC funding and what they learned. Finding them will be another matter. They are the people that can provide the best advice on this subject. Consider them your beta testers. VCs too often get clumped together, but there are differences amoung them.
Some will flat out tell you $2 million isn't worth the effort because the time it takes them to evaluate your deal is about the same as a deal 10x the size. Others VCs will relish the opportunity for a deal this size.
I've met founders who hated their VCs and others who valued the experience and insight they offered. I've also met VCs that would probably babysit for you if needed and I don't mean the company.
I would also try to solicit people who got funding at different time points such as during the dot com heyday and after. The lessons are often different.
Whatever you do, make sure you, MG, Gillian and other key people understand each others point of view, even if you don't agree.
I would hate to see the current SEOmoz team lose any of the control that they have over the operation of the business.
I'm sure that you have done the math, but a $2000 investment/loan from only the current Premium members would be more than that two million you are considering and the number people with an interest in the outcome would probably bring that amount considerably lower.
I vote with MG.
I say don't. I've worked at two search firms that took outside investment and one was folded within a year of doing so and the other (who is somebody y'all would know) most likely will be out of business by the end of year.
I think that "pressure to accelerate growth" is a huge pain point. Venture capitalists that invest in search seem to do so because they read about how profitable search is and what the growth rate of our industry is (or worse yet, one of 'em read one of those 'get rich on the internet' books. What they fail to realize is that said growth and profitability doesn't occur because you throw money at a 'good thing', it occurs because we are doing the right thing at the right time. Innovation gets sacked in the interest of increasing the money-making components of the company. And it really sucks to be a SEO in an environment where you aren't able to develop new tactics and stay on the cusp because that's not time well spent in the eyes of a board motivated by the bottom line.
That's my .02 @ least.
I feel that one of the best traits of SEOmoz has been your agility. You will lose some of that with major funding.
Have you considered a partnership with another organization that would benefit from your hardware and professional needs? There are many organizations that would find association with you to be valuable by itself. And help defray the capitol costs.
If you combine that with private financing you should be able to maintain the culture and positive qualities of the current SEOmoz. I would rather wait nine months to a year to see all your cool new stuff than see it in six and have you harried by an investor that doesn't share your vision.
I agree with Parks... if you want to stick with it, and plan to continue with the company, doing what you're doing, into the forseeable future, don't go with the VC.
If, on the other hand, you're looking to make money so you can go on to other things, then of course take the money, since it will let you grow, from what you say, at least three times as fast.
So, do you want to stick with this site, or are you wanting to make money and move on? That will answer your question in regards to whether or not you should accept the VC funding.
Rand, for tool development you might also consider a joint venture with a deep-pockets SEO agency, one that would be willing to foot the bill in exchange for a private-label version.
I may have a more specific suggestion if you're interested...
Didn't you have this opportunity a year or two ago and posed a similar question before.
VC funding can change a lot. The dynamics and operating style of your business would change dramatically with a discipline, focus and drive on profits.
What are the vc's looking for as an exit strategy for their investment. Will they want the company sold at some point, do they want a regular roi on investment or some combination of both?
Can you internally handle the changes that the type of growth you envision with that type of money would mandate.
Can you manage lots of people, hire managers to manage lots of people, monitor the progress and potential profitability of a lot of projects at once, and maintain an atmosphere that you enjoy and works for you?
How much input would the vcs have.
Finally, we seem to be moving into a liquidity tightening period of time which hasn't hit the US since the early 1990's. That means there is a credit and cash crunch.
Frankly what is the cash/equity/debt structure of the vc's. Will they have outside pressures from other investments that could force them to put more pressure on MOZ?
Lots of things to consider. It would be real nice to get a lot of investment cash from an entirely benign, safe source with an ability to give you tons of help in areas where you might need it and won't bug the crap out of you in areas where you feel comfortable. (Like if my Dad had an extra $5 million and wanted to give me a chunck to "play/invest" with" ) VC's aren't like that....but if there are some you are speaking with that have some of those characteristics...that would be nice!!!
Growth on your terms. Growth on someone elses terms. Profits you are satisfied with. Profits someone else is happy with. Two years is not that long of a time.
If I were only to need 2 mil to grow, I would look to private individuals who will be happy with a great return on the investment alone without taking a percentage of the biz, forever!
Giving up control wouldn't be worth it. My 2 cents
I would say keep SEOmoz private. Of course not knowing all of your internal details this is somewhat of a guess.
It appears that you have a good group of people working for you, and that you are all on the same page. You have brought your company to the point it is at now.. so why not bring it further along without help from VCs? You have creative ideas, and I'm sure you have a lot on those white boards! Stay current, and don't lose the drive that has gotten you this far. VCs will always be there, and you can always exercise that option in the future...
The most important advice I can give you is surround yourself with the RIGHT people.. Good people! Because nothing can take a business down a few nothces really fast like ONE bad apple!
Good luck! :)
I have been debating about becoming a premium member for some time. Not just to help the thirty or so websites I manage for my company, but just to help me personally. You guys have done things that no one else has done with limited resources. You are rock stars in the SEM world.
With that in mind, and everything I have seen since starting business school (now a grad student), I say stay private. I have seen great companies ruined by moving too fast.
Having that money to grow more and expand your offerings sounds like a great thing to me too. But I don't want to see you turn corporate, or your tools, or your people.
Life is better in slow motion. If we all slowed down a little and let our thought develop correctly, I have a theory that things would work a little better.
If you take the VC money, I doubt I would go away because I know what you would develop in the beginning. But I'd hate to imagine what you would lose in the approval process in a few years.
Hang on to your individuality. It's your rock star power.
I left a company that grew exponentially but I really can't state with any conviction that the growth was due to the VC. On the other hand, the VC did allow them to support the growth. It may have been painful without it.
On the bad side, I saw the cushion of investment dollars push us into some business decisions that I disagreed with. Things like investment in furniture and building overhauls instead of infrastructure (the infrastructure is still flawed). It enabled us to go on a hiring spree as well. Adding people sometimes covers up issues that could have been corrected technologically.
In my humble opinion, having the money sometimes clouds our judgment. As well, you risk 'outgrowing your demand' by making huge changes that will support more growth. Though it's painful to grow a business without it, I respect businesses that show gradual growth and make careful, justifiable, and responsible decisions.
Best of luck! I am one of those guys that promotes your toolkit and tools, but since I don't do SEO full-time, I can't justify the expense myself. Perhaps you'll have a commission program some day. I'd sign up for that - and if I made enough to cover the spread, I'd subscribe.
Doug
https://www.douglaskarr.com
Rand, the new premium membership scheme...surely that is bringing in a lot of additional money which wasn't there before...can this not be used to reinvest in the core services you want to provide?
When VC's invest in a consultancy type of business...they will push you to larger and larger clients, at higher rates... to keep the figures growing. Let's say they help you hook a mega client....what time will be left for the blog and all the good work you do?
Ultimately a trade sale is probably the best exit route you have.
For what its worth, it’s a double edge sword on what you want out of your business. While customers may be the users of the service, you have to ask yourself, why did you start SEOMoz in the first place. Where you just giving yourself something to do, or where you looking for money?
If you feel you are just looking to pass the time and make what I see as mom & pop money, then hang on to the biz with all your fingers and toes, otherwise start fishing for investors.
I love the way Richard Branson runs his company. He has the right ideas, and gives the people the power, however we still is worth plenty with his public company.
From my experience, Your going to be looking at an around 5mill from a CV for around 22% share in your company. Anything under less, you will have to go find yourself people(Angels) that are interested in investing in your biz.
Best of luck!
I think that one can be blinded by potential and money thrown at them by private investors and miss the true essence of what SEO and SEOmoz is all about; which is open communication and true social marketing centered around SEO. I think when you have investors or too many people with their hands in the cookie jar you lose the control and purpose of the initial goal, which is SEO education. So if your goal was to be commercialized and controlled by "the man", which is not what I get from this site after being a long time reader, then you should do it. But in my opinion, which is based on experience, I think the control and suppression of your words and freedom that you will endure to talk about what you want in the way you want to, will end up hurting SEOmoz in the long run. But I know how inviting it can be when someone flashes money in front of you and offers you potential. So again if commercialization and money is your goal then go at it.
-Blue Wave Design Studio
Wow what a fantastic opportunity! i had the priviledge of speaking with Gillian and Rand (very briefly) at SES and was very impressed. The values of putting people and employees first was wonderful to hear.
The passion and dedication to the search field is evident and not driven by money. There is nothing wrong with making money, as long as it doesn't conflict with your core values and belief system.
When Google took the money and went public, I prophesied doom and gloom, but i think it has turned out well. Google has used their money to build a leading company while still valuing people as individuals.
My vote goes to - stay private. There are too many cons in giving up control of your company (even just a little), plus you will loose the "moz" part of it. And (very important!) your better half says "no". Listen to the wise woman. :)
For the way you're approaching it, and the community you've built, I think your idea to seek outside investment is a solid one.
Wow! There's a subject for a poll if ever I saw one. I'm in two minds:
Yes - being able to do the things you want, now, without worrying too much, has got to be a good thing.
No - I've worked for PLCs & VC funded companies, and the rpessure to deliver is harsh.
At the end of the day, only you can decide that Rand.
Great conversation starter. Rand & team, you are in an enviable position. It takes a special group of people to build the community you have.
I have to side with EGOL. Do what you love. Do you enjoy developing tools and programs, or do you prefer the consulting side of the business? Where do you see the most growth over the next 5-10 years? Will the SEO industry grow fast enough or can you attract enough premium members to offset what you might be giving up in lucrative consulting arrangements? Or is it the other way around? You know your business better than anybody else, so do what's right for you and for your team.
Best of luck with the decision. If it's becoming too much, you can always sit on it for a few months. Decide not to decide yet. See how you feel after sleeping on it a bit. Sounds like you might have already done that for a while. Either way, keep us in the loop.
I would say, do you really need to take on staff, by that i don't mean you dont have enough work to do, clearly you do, but can you not encourage the regulars here to contribute some time and elbow grease into the site.
Even better to allow them to submit tools etc that they have built directly to you, perhaps with a few hints from you, the tools would be what you are looking for.
If you can get VC then i suppose its an option, but this site seems very social to me....maybe a social approach to the work may be good?
Rand, my immediate reaction was 'keep your business to yourself.' But after reading your points, I have to admit there would be some merit in taking on some extra venture capital. Know what I'd do if I was in your shoes? Hire some time with Guy Kawasaki. He's great at what he does. At the very least, read his book The Art of the Start.
My gut feeling: 1. You've paid your dues, honed your skills, and now it's time to parlay upward. 2. The ideas that have been slowly percolating in the back of your mind are ready for application. 3. Swift, sharp action is needed--not fiddling around the edges. 4. You should be forceful and make these projects happen.
My opinion: Get a benevolent angel investor to put up $2 million and start making some serious moves. Parlay your success to a higher level.
P.S. You remind me of Merv Griffin. Merv learned over the years that the only projects of his that didn't work were the ones where "I wasn't forceful enough and didn't them happen."
Sorry I am late to this discussion. The only way I would take the money is if I could guarantee control Rupert Murdoch style. Supermajority rights, special voting stock, etc. Right now you will have incredible leverage with any investor because they smell gold. As many up here suggested angels or venture debt sound like much more attractive options if you feel you need outside investment. If you really need $1MM I guarantee you could get 100 Mozzers to put in $10K apiece at very favorable terms. Let me know when the private placement memorandum is ready!
shoemodo said it best: let the mozzers invest...
I'd say go for it! If you can keep seomoz the same style as it is right now, and have the trust of the investors, you will have a lot of success. I think that in the end, you will do what you feel is right for yourself, your team, seomoz, and all your members.
I wouldnt let a VC in. :)
Like said before, I think you need to decide what YOU want with your future. Say you go for it, and suddenly its swelled into something that your heart just isn't into completely. You will wind up burning out quickly. Now if you are in it for the money and don't really have specific goal for the company then taking the chance might be good.
Ultimately you should decide what is best for your future. Our company was offered to be bought out by a larger company once. In the end we decided that even though we would be making great money, we would be sacrificing our vision and give up our control of the company. So we passed on the offer.
Hey Rand,
If you can retain majority, and if you believe that the capital injection will benefit SEOmoz in the long-term, it sounds great. It means more red-tape, and less freedom, but it could also mean a massive increase in revenues as well as branding for you guys outside of your current niche. Ofcourse you know that :)
I think the fact that you shared this with us is indicative of your openess, integrity and sincere desire to be a real service and authority member of your/our community. You guys have what it takes, and whatever you decide, I'm sure you'll have overwhelming support and best wishes. You certainly have mine.
God speed!
Sorry I am late to this discussion. The only way I would take the money is if I could guarantee control Rupert Murdoch style. Supermajority rights, special voting stock, etc. Right now you will have incredible leverage with any investor because they smell gold. As many up here suggested angels or venture debt sound like much more attractive options if you feel you need outside investment. If you really need $1MM I guarantee you could get 100 Mozzers to put in $10K apiece at very favorable terms. Let me know when the private placement memorandum is ready!
What percentage are you going to have to give up for the capital?
20% of SEOmoz will open the door to a hostile takeover.
Personally I would wait and let the growth work organically. :)
Just be careful. I love SEOmoz just as it is!
Rand, I dont think you need more advice, but hey - it's free :-)
Although you may consider outside investment, I think VC funding should be a last option, unless you can find the right VC (ok, so I stated the obvious). Specifically, if you can find a financing source that:
a) FULLY understands what you do and has 100% confidence in you to manage it and therefore...
b) Is ok to not be a decision maker, or threaten to bring about change in a manner that "seems textbook to an MBA but is contray to what makes business actually work". You know it happens all the time.
I see your point in wanting to grow faster, but slow and steady often wins. We all know that you have the capacity to accomplish your goals for the business with of without outside funding, and that puts you in a totally different category from a buiness that needs outside investment to survive.
As someone pointed out, I am sure there are plenty of non VC sources that you could draw on, and those would allow you to accomplish your goals without giving up any ownership of the company - which is the best of both worlds.
- OldSchool
Rand/Gillian,
Some basic thoughts:
1) If you take outside investment they will expect a return. VCs aren't into annuity returns - the will want you to sell or IPO. Is that OK with you?
2) Most VCs want closer to a third if the company, not 10-20%. And, frankly, a $2m investment for 20% values the company *now* at $10m. Is that really reasonable? Angels *might* be different and more willing to accept periodic distributions from profits. You still need to figure out what they expect as ROI and how they expect it though.
3) You state a problem (that you need to scale revenue and that subscriptions aren't a good value for some/many of the people) but does creating more things really address that? Do people need MORE or DIFFERENT? Do you simply have a product set that doesn't require month in month out subscriptions? Maybe people subscribe, cancel, resubscribe because their needs are episodic. The new tools might not address that. So, basically - is the issue with the product set or the way you're choosing to monetize it?
And all of the people who ask above what you want from the business make a good point - bigger is not equal to better.
From my point of view I'd worry that you would lose some of your focus and your content would start to go downhill.
On the other hand if your looking to grow quicker and end up selling your company in 5 years or so investment will be the right way to go. Opting for an investment is generally a decision to increase the amount of money your making. I'm under the impression that your doing pretty well with subscriptions and consulting, certainly better then you were in that last financial report of SEOmoz your published.
Oh, this is an aside, and not really about company finances, but there's a lot you can do with the structure of the company itself to manage savings and such. I recommend reading Ted Tesser's The New Trader's Tax Solution. Good stuff there.
I like the idea to opening the door to a community solution. If it's ideas that you want to see implemented and you love your user base, why not take the next step and let some of those most dedicated members help build the ideas. If that works, you'd have active contributors around the globe.
My vote would be to not take on any VC funding. They are going to want to come in and change things, increase pressure, etc.
If you are confident in your company and your ideas and all you need is capital - go to a bank and get a SBA loan, and keep control of your company. You built this from nothing, and it would be a shame to see someone with 20-30% control ruin it for you.
That being said, I'm sure there are some instances where the right VC funding might be good for you. With this day and age I'm sure you can find out a lot about the person(s) online, maybe through a blog. If someone like Guy Kawasaki wanted to invest, I would say yes.
It is you who know better for the company as you have more indept view of the company.
If i put myself in the same situation where i think i need some funds to grow rapidly and i am confidenet that investment will double itself in few years of months than i would go for a loan rather than having a partner for all my long specially for a company that i treat like a child and love the enoviroment and my region so much that i dont want interfarance of other. Even my own army wont like to have someone on their head when they love their leader so much.
I hope i clear my mind.
Sidenote: If you want to sell a sliver of SEOMoz's soul to ME and any number of loyal followers, I would be happy to be on the ground floor! Your transparency and honesty is awesome. It seems to remind me of another mildly successful company wo tries their hardest to maintain that image...
Cmon Rand let us in man, I promise to let you blog about whatever you want :)
You've got 15K readers... there's got to be a couple hundred of us that are willing to invest 10K for a small piece of SEOMoz.
I would buy a chunk...... all of Rebecca's space
Haha. If we're auctioning individual mozzers, it could get interesting!
There's too much benefit to remaining smaller and independent. Keep your stress levels lower and you'll maintain your sanity for that much longer.
Outside investment does mean more money faster. It also means more late nights, headaches up the wazoo and tension with your significant other. The money will come in time, it's not worth the hassle of outside influence.
Is a third option possible? Instead of hiring 10 new people could you hire 2 or 3? Wouldn't 3 great people be easier to find than 10 people that average out to simply good?
i'd say no.. u can do affiliate tools like https://mcc.hitslink.com
you could sell advertising.
do you own copyright to SEOmoz? would it not be seen as a play on chefmoz or dmoz, etc..?
what is your goal to do this as a business forever?- don't sell out to VC
Or build it up and sell it to a media company?- get VC to increase your site, offerings and give them a percentage at sale..
This really comes down to a debt vs equity financing solution and which one works best for you. If you have that many ideas and you need more help, it shouldn't even be a question in your mind of whether you should take money or not... That part is easy. If you believe that you have the management skills necessary to leverage the money and grow, then take the money. The question really comes down to how in my mind. Given your size, experience, etc... you really should have quite a few options available to you. I personally in this case would go out and get a loan as opposed to VC funding/Equity financing. Im fairly certain that you should be able to do so.... I have been in business for 4 years and have gotten several small loans (1ook+) just to build my business credit profile, hire an employee, etc... Anyway, long story short is debt financing can strap your cashflow with the payments , but if you manage the funds correctly its a better solution for you guys I would think. If you take on debt, be as frugal as possible with the funds and make sure to crack the whip because if you don't make it, you are on the hook. You will have more than an unhappy VC to worry about. I'm fairly certain that you will be successful though which is why I would say take on the debt and don't let the outsiders in!!!!
As far as the value, I'm pretty satisfied but I am looking forward to that Viral Marketing and Linkbait article that was supposed to be out a few months ago...
If you plan on selling in the future, take it. Otherwise don't. If you need the money just to make more money then at the end of the day its your decision
Wow. Basically the question is this: are you ready to swing for the fence?
When you take money it's "all or nothing". These VC guys are ruthless, and they won't settle for simply a PROFITABLE business model. It's like rolling a die to them. Throw a 6 and they (and you) hit the jackpot, 1-5 and you're OUT... next please
If you take VC money just know that it's ALL or NOTHING. There is no inbetween.
So long as you guys understand that, I say GO FOR IT.
That is a really tough call, but I applaud you for using your best resource for advice!
Look at what 37signals did. They chose a small VC who shared their vision, and don't forget that some VC's can bring a great deal of knowledge along with their money.
Some examples would be:
Guy Kawasaki - https://www.garage.com/
Jeff Bezos - https://www.bezosexpeditions.com/
So it comes down to a decision, do you just need money? Or do you need both capital and assistnace to handle the current and future growth of SeoMoz?
There are two things which can kill a small business, too much work and too little work.
Either way I really believe in what you guys are doing and look forward to what might be coming down the pipe.
I am just wondering. How could a VC sell their stake in SEOmoz? Who could be interested in buying 10-20 % of SEOmoz from them. Wouldn´t a sale only make sense when someone would buy the whole company?? Are you ready to sell SEOmoz?
I haven't been around here for a very long time...but what I see and what makes me come back and get addicted is the impression that you love what you do, you are passionate about it and you therefore are a very happy and creative guy.In my opinion this is what makes you so good and it is your personal key to success... the key factor that fills that whiteboard too....I believe in natural or organic growth ...the way I believe in organic link building. ;-)Keep that solid basis and take your time to grow on it...and don't lose your key to success on your way. I would hate to see that whiteboard stay empty in a year or two... cause you have lost your creativity to some VCs.
I've seen a lot of company's combining interest with software developement firms to roll out tools and websites for a smaller amount of money or a small amount of money and some stake in the company. Some times it works. Sometimes expectations are blown way out of propotion before the thing even starts. With resonable partners I've seen some great collaborations.
New tools and toys are great, tips and q&A are fantastic. But one of the things that makes SEOmoz work above all others is the atmosphere and feeling that is generated here.
I like the fact that you guys are enjoying yourselves and being successful.
I'm not sure how VC money will add to that. extra pressure, more overheads meaning you require even more premium memberships, quick growth often gives less time to adapt to the market. Larger company often means less agility within the market.
It doesnt feel right to me.
However, if outside investment means you will definately be happier, have more time, more freedom etc. then go for it.
But not getting VC money you will still get where you want to be, it just may take more time.
Looking forward to hearing more on this
Wow, its hard for me to say what I would do in that situation as well. Really as you already put it, there are several ways to look at the situation.
If you're really looking to grow SEOmoz and could still remain largely in control of the direction you want to go then I would say go for it. However if taking on outside investments would compromise the vision you had for SEOmoz when you started, then I would pass on the oppurtunity. If thats the case then I definitely wouldn't compromise the great site and community you've got going here.
If you can get a VC who can take a look at your business, see that you're doing all the right things and can let you grow your business which you've already proven you can, then that's a plus. I just hope that they don't put so much pressure on you that you end up hating the business. If there aren't any alternatives and you're growing frustrated at the rate of growth you're at now, then you have your answer.
I worked with VC funding when I was 18 -- and let me just say .. it's difficult. If you do go with it, make sure they stay very close to the goings on of the company, very close. We had funding, but they chose to only pop in and be curious about the firm every quarter, and only for a few days, so it was hard for them to understand what was really going on. Alot of people will tell you to distance yourselves from the VC in the relationship so you can retain control -- but ultimately they can walk away and leave you high and dry, so its better to keep them close.
Didn't firefox run a two page ad in the New York Times financed by donations of their users? maybe something of the kind would be possible to fund certain projects by donations.
it is a tough decision on if you wish to take on capital or not. The primary question you should have in doing IS NOT what you need the money for, but what your long term capital strategy is. if your primary interest long term is to capitalize with either a buyout by a larger firm, or an equity offering, then venture capitalist can be extermley helpful in getting you top dollar for your comapny - thats what they do!
If you do not intend to have either a sale or an equity offering, the VC money is very expensive long term, as they will require a return on capital that is extremley unrealistic if you plans where to finance that out of cash flow from the business. At that point, you would be better of securing debt finacing that you could manage from your current earnings.
So, before you take on outside investors, you need to think about your strategy not only for today, but 10,20, or 30 years down the road.
Tough questions, but isn't it great to have those sort of challenges?
Depends what you want out of your business.
If you are in it for the long haul, keep it small. If you want to move on to other big ideas, VC it up.
As for the keeping-it-small argument, 1200 subscribers * $49/month * 12/months = $705,600 which = a nice nest to build upon, no?
Personally, I would never accept an outside funding unless I really have no cash flowing into the business. However, since Seomoz has a positive business it is better to keep as it is and grow slowly. Most companies these days fail because they tend to seek for funding and hire 20-30 new people and end up without cash within 12-24 months.
If the investors are going to be hands off go for it. If not, think twice. Remember what happened with Andy over at Fortune Interactive...
It is a very though question that Rand is talking about. If you decide to let somebody influence your business you have to be sure who are you dealing with.
The one thing that I suggest you to think about is this: are you in seo because of the money or the thrill itself?
Also, how much money is enough for you? Where is the limit in earning?
p.l.u.r.