Having been burned by venture capitalists before, Rand Fishkin wasn’t sure he wanted to raise money from them again.
But frothy market conditions and budget demands at SEOmoz — his growing online marketing software company — convinced Fishkin it was time. That and a good rapport with Colorado investor Brad Feld, who pulled the deal together in seven days.
It went down in March, giving SEOmoz $18 million in funding that will help grow the Seattle company from 60 employees to around 100 within the next 18 months. Boulder-based Foundry Group, where Feld is managing director, was the lead investor. It was joined by Bellevue’s Ignition Partners, which was part of SEOmoz’s initial $1.1 million funding in 2007.
It’s a big financing deal for a Seattle startup, especially for one that has publicly lambasted venture capitalists for shoddy treatment.
After $24 million in financing fell through last summer, Fishkin, 32, used his blog to detail the tortured process, following up on a similar confessional after a funding attempt in early 2010.
The blog posts were widely read and became helpful primers for other entrepreneurs. But they raised questions about whether SEOmoz would ever get the capital it had sought to expand its business providing tools and services for online marketers. The company, founded in 2004, built an online community with more than 400,000 marketers. More than 15,000 pay for premium subscriptions.
“It was tough for me,” Fishkin said of his decision to once again seek venture funding.
“These girls had broken my heart so many times I wasn’t sure I ever wanted to go dating again.”
Fishkin said it helped that he felt comfortable with Feld, who also has a widely read blog where he had commented on Fishkin’s tribulations. The relationship deepened after Feld and his wife began interacting with Fishkin’s wife’s travel blog.
Feld’s Foundry Group has also backed Seattle startups Cheezburger, BigDoor and Gist, which was sold to RIM last year.
When Fishkin called Feld on March 9 for help on raising capital, Feld gave the advice and then asked to lead the funding round. After a flurry of emails, Fishkin flew to Boulder ad the deal was offered over dinner that night. Fishkin said they really only haggled over the valuation of SEOmoz, which ended up at $75 million before the funding.
“SEOmoz is one of those companies that you just know is going to do big things,” Feld said in today’s release.
Even without additional capital, SEOmoz was on track to increase sales from $11 million last year to about $20 million this year. The additional capital’s effect on revenue should start showing up in the third or fourth quarter, he said.
It’s good growth but a slower rate, compared with the doubling of revenue that SEOmoz saw the previous five years. That led to budget pressure and a board decision in February to take advantage of the good climate for startups to raise money, Fishkin said.
Previous investors Ignition and Curious Office gave him a big nudge.
“They were certainly pushing to raise the funding because the timing’s good … there’s just so much market opportunity,” he said.
Fishkin would like to see SEOmoz go public but it’s not likely to happen until 2015 at the earliest. By then its revenues should be in the $65 million to $70 million range, he said.
“Our goal is to build a big company here, to have an IPO eventually and maintain our independence,” he said.
In the meantime the company plans to build up its product and marketing teams and find a bigger office than its current space near Pike Place Market.
Fishkin’s also eyeing potential acquisitions and mulling a name change to reflect that the company’s marketing tools and services are now used for more than search-engine optimization. In conversation he calls the company “Moz” so that could be a likely moniker.
But the first order of business is closer to home. Fishkin and his mother, SEOmoz co-founder Gillian Muessig, are each receiving $438,000 in liquidity from the financing round. That’s mostly going into a fund they’ll use for family purposes, like paying off his grandparents’ mortgage.
Muessig, 58, will retire from the company’s board and her role as president. Feld and SEOmoz chief operating officer, Sarah Bird, are joining the board.
Here’s one of the illustrations from the funding press release: