Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. I’m a little concerned for today’s guest, Rand Fishkin. I don’t think your book is going to do as well as it should. Let me start you off with this. Here’s why. So I’ve got with me, Rand Fishkin. He is the founder of Moz, co-founder of Moz. They do SEO software, tools, and resources for marketers. He’s also the author of a book that I’ve really been enjoying “Lost and Founder: A Painfully Honest Field Guide to the Startup World.” The reason I like the book is I think the reason why it’s not going to do well.
Rand is known for giving people really actionable, useful, effective advice on marketing. He’s known for creating software that helps people market online. Well, that’s what Moz is about. He’s also known for being the guy who’s talked about depression. I think if you would have written about either one of those topics, depression . . . I thought you were writing about that “Lost and Founder,” I thought was like, “I was lost and here’s how I got my . . . ” If you would have written about depression I think people would have gone to this book and read it and appreciated it and read it. If you would have written about marketing people would read it. I don’t think you get enough credit for being a CEO and a guy who can put together an organization and grow it big because I think you talk a lot about your challenges.
And then I’m reading the freakin’ book, good, this is mind blowing. This guy should be a fucking VC instead of whatever new business is coming. What is SparkToro? Right? You got practical understanding of the business world, advice for entrepreneurs from an entrepreneurial background, a guy who’s built it. And there’s like no agenda for us. You’re not trying to get us into some kind of . . . it was really well written. I think people are going to underestimate it and then not pay attention to it.
I’m going to ask you a question about that in a moment. First, let me say this interview is sponsored by two great companies. The first will do your email right. It’s called ActiveCampaign. And the second will help you hire your next great developer. It’s called Toptal. I’ll talk about those later. Rand, what do you think of that? I was looking at your face, you seem like you like me before the interview and I don’t think you’d like that intro. Talk about what you think because I wanted to speak from the heart there.
Rand: Oh, so I agree with you that I don’t think the book will do as well as it could potentially do. Although I’m not sure for exactly the same reasons.
Andrew: Tell me why.
Rand: And also, there are at least two chapters on each, depression and marketing. So . . .
Andrew: Yes, it’s true. It’s true. So I don’t think that you get enough credit for being a good manager, a good CEO. I think you talk a lot about marketing. And then you say, “I heard someone who does this well. I’ve learned a lot on the job.” But let’s just be clear, you built a phenomenal company. Revenue, you talk about it in the book so we can say it publicly. What was the revenue for 2017.
Rand: 2017 was 47 and a half million, I think.
Andrew: Forty seven and a half million dollars. That’s phenomenal. Right?
Rand: Well, it depends on what 2016 revenue was.
Andrew: You actually give me like a whole spreadsheet in your book. I love that you did that. Hang on, 2016 revenue, $42 million, 2015, $37 million. There’s like a whole thing in the book you.
Rand: Yeah, there’s a whole thing. So, Andrew, you know this, right? You’re in the Bay Area, you’re deep in that world, you know that once you take venture backing, especially in the quantities that Moz has, what are we, $29 million in now. There is a certain amount that you have to grow at in order to be an interesting venture investment, in order to have an interesting exit that returns money to the funds that put money into you. And Moz is not there, not there. So yes, I think $47 million is great. And, you know, it’s sort of profitable to the tune of, you know, 10% of that went into the bank account last year. It’s growing at about 10%. If you and I owned Moz and we were taking out, you know, $4 million a year, we’d be thrilled.
Andrew: I get the sense that you in the book throughout, there’s nothing really where you explicitly say it. But I get the sense having read the book you think, “Maybe I shouldn’t have taken venture capital. Here’s where my life . . . ”
Andrew: You do. You’re nodding. Explain why.
Rand: Yeah, yeah. So I think I think the two investors that I raised money from, Michelle Goldberg from Ignition and Brad Feld from Foundry, are two of the most awesome people in the venture world. I think that their knowledge and talents and skills and background upgraded me a lot. I think they made me a better entrepreneur. And in a lot of ways, I’m grateful for having raised money once because it showed me that this is not a path that I love. Right? And I think I always would have wondered, I always would have regretted and felt like, “Oh, am I a real entrepreneur? Am I able to play with the big kids?” And so I’m glad from that respect. But from the respect of, do I think it was the right move for Moz the business and do I think that that money actually made us a better company and a better a product and helped us serve our . . . you know, do our mission better? I think after the first $1 million we raised in ’07, the answer is probably no.
Andrew: Tell me why. And, by the way, guys, I think Rand is really good at like talking about the things that didn’t work out. Trust me, this book is freakin’ phenomenal. The guy knows more about management as a CEO than he lets on. He’s probably in this interview going to talk about all the things that he wished he done better. Go read the freakin’ book. He’s good, right? I got tons of stuff in here about how to hire developers when you’re not a developer, how to create the right culture, flywheel verse freakin’ growth hack. Anyone who doesn’t want to buy the book because they don’t like you, should go in the freakin’ library and just read that one chapter and they’ll understand why growth hacking is now out of favor even though it clearly works, right?
There’s lots of things in the book in there. Why you did well by getting into a growing market. There’s something that you missed I want to get into but let’s go into why funding, why you think it wasn’t the right path for you?
Rand: Yeah, so I think that basically what happened is that once we took that initial million we were able to build, you know, an interesting product for an exciting market with a growth trajectory. And then raising future rounds was a big distraction and made us believe that we needed to be bigger than what we were, that we had to go into more markets, that we had to serve a bigger audience, that we had to create different products. And that lack of focus before we were ready for it, I think actually harmed us significantly, created a ton, a big vacuum in the SEO software space, that a bunch of competitors jumped into because we took our eye off the ball.
Andrew: Can you give me an example? What’s something that you did that you wouldn’t have built if not for funding, that took your eye off the ball?
Rand: Yeah, sure. I can give you a bunch of examples. So one of the late chapters in the book is called Focus and it talks about the layoffs that Moz did, which were a particularly painful time. And how we basically shut down all these different business units, sort of four business units that we had started up. One was Moz Content, another was Followerwonk. And these are perfect examples I think of things, you know, acquisitions I wouldn’t have made, product investments I wouldn’t have made because we needed to double down on exactly what we should have been doing all along, which was just that SEO software. Helping people with the core functionality of SEO. And I think those core features are places where our competitors in many cases eclipsed us. And some of them became bigger than us. I mean, I think, you know, SEMrush just raised $40 million plus round. I think they’re probably doing, you know, one and a half times what Moz’s revenue is. And they were not that way five years ago. I think we let that slide.
Andrew: You know what, you talk in the book about a business that you refer to as “Carhole.” Let me get to that project in a moment because I think that tell us a little bit about where you’re going. But let me ask you this, you . . . here’s a quote directly from your book from “Lost and Founder. “Damn,” they meaning founders say, “Damn, they always shake their heads, a $45 million-a-year business doesn’t make you rich? Weird.” So you’re not rich yet? You make $220,000 a year. I love it. I don’t know why you say this, you have two years savings in the bank, your wife still drives a 2003 Kia, and you can’t even invest in startups.
Rand: Well, I mean, I suppose like . . .
Andrew: Technically you could.
Rand: I’d be playing a little fast and loose with the SEC rules around what accredited investor means, but probably I could get around it with the Moz stock that I hold. I mean, the biggest issue . . . I don’t think I included this in the book, but do you know how much it costs to put your grandparents in a retirement home? Like the down payment.
Andrew: You did mention that you’d like to do more for them How much does it cost to put your grandparents in a retirement home?
Rand: So if I wanted them here in Seattle, you put down about $600,000 in cash and then you pay, you know, like a monthly rent on top of that. And so if you’re wondering why there’s no $400,000 sitting in our personal accounts because between myself and my brother, we want to make sure that we can cover that payment should that end up being the case.
Andrew: Wow wee. And meanwhile, you had a chance to sell your business, HubSpot offered you $25 million, you said, “No, I want $40 million.” Do you regret not taking that deal?
Rand: I mean, not only did they offer 25 million, we would have gotten probably half of that in stock. And they went public, what, four years later and that stock would have been worth 20 times what it was worth when we got it. I don’t know, 10 times, something like that. So that would have been . . . it would have gone from a really interesting deal to a huge deal. So yeah, I regret that a tremendous amount. And I think I would have learned a lot going into HubSpot and seeing what that acquisition was like and working at that larger company. We’re scaling up. So I have a lot of regrets. Plus I love, Dharmesh. I kind of wanted to work with him. So I regret a lot of that.
Andrew: All right. Let’s, let’s get into how you built it up because I do think that Moz is a big enough company. You won’t over 20% of the business, right?
Andrew: It would sell for what? Four to 10 time revenue I think you said in your book. What do you think it would sell for?
Rand: If we’re growing at a reasonable, you know, like 35%, 40% a year, I think where it is today, it probably would go for between maybe $1.5 and $3.
Andrew: $1.5 and $3 million.
Rand: $1.5 and three times what its current revenue is.
Andrew: Okay. All right. And then you also talk about how . . . oh, this is good, you’re saying, “Hey, look, preferred stock is what investors get, as an entrepreneur be aware.” You should possibly buy those preferred stock because?
Rand: Yes. So, I mean this is a hot tip. A lot of venture investors are now savvier about this, but there was certainly a time when most deals that were done in the VC and startup world included some clause that a majority of the preferred investors, not the majority of the preferred shares, but the majority of the preferred investors. And so if you, as an individual, are a preferred investor in your own company, you get to be part of that conversation and negotiation around a number of things that can sometimes be frustrating for entrepreneurs that investors will do behind your back. I haven’t actually had one of those situations at Moz, but I have plenty of friends who have.
Andrew: Like along the same lines, you say, “Look, have your investor go line by line through the term sheet with you and then of course get a lawyer, not a friend, not someone who saw Law and Order, but a real lawyer who’s experienced in the space to go through it with you.”
All right. You also say, “I love SEO. I’m like an SEO nerd.” And still you tell people, “Do not do what you love. As a CEO you should not be following your passion.” Why not? You even have a quote in your book where Steve Jobs says, “Do what you love in a sense.” Why do you think that we should not be doing that as founders?
Rand:Well, I mean, so, a) all the quotes that start the chapters are things that I argue against. So the Steve Jobs quote is ironic from that perspective. But, yes. Basically, my contention here is that is not that you shouldn’t do what you love but that you shouldn’t expect to get to do what you love. If you’re an SEO nerd like me and you start an SEO software company, you will do a lot of . . . let me give you an example. I’m starting this company SparkToro.
Let me tell you what I’ve done so far. I have spent days not hours but days on the phone with tax offices in Washington State, in California, and New York. I have spent hours and hours with accountants, with lawyers. I think I have $25,000 in legal fees and my lawyer is a little under 500 hours. So that’s a ton of hours that we’ve put in. I’ve had lots of time where I’m setting up things like Gusto for payroll and setting up . . . I had to figure out how to get my Adobe subscription correct. I had to like get off all my Moz stuff.
I’ve done a ton of work that I am not passionate about that I don’t love to someday enable to vision of what I want SparkToro to be. As a founder, you don’t get to do the work. Your job is to enable the work to get done. And in early stage you’ll get to do some of it but as you grow you do less and less and less of that work that you’re passionate about. And you have to be prepared for that. If you’re not, it can really hit you hard, right? It sort of it becomes this emotional thing where you go, “I thought I would get to do this thing because I’m running the company.” And being unprepared for that can be overwhelming.
Andrew: That is really good advice. You know what? There are times at Mixergy where I felt like I think I’m done here mentally, and then I think, “Look at all those stuff I set up. I’m going to have to go through the corporation process. I’m going to have to go through hiring people. I’m going to have to go through this and do it all.” Now I think I got this. I think I’m okay.
All right. So what you’re saying is, “Look, not just do what you love, is just love or be ready for this whole enabling of the whole process. That that’s a big part of the job whether you like it or not.” I remember when I was in college there was a “Wall Street Journal” article about these two guys who left really prestigious jobs to go start a business and this thing just stuck with me in my head. They hated how they had to deal with the carpet ripping. That these were guys who only dealt with high level brain functioning stuff who had to figure out how to like get duct tape on a carpet or call up the maintenance and they said, “This is just not for us.” And I get it. Entrepreneurship is a lot of that.
All right. You did though, do the right thing by finding a growth market. Talk about how SEO is the growth market and how that helped you grow.
Rand: Yeah. I think the biggest observation I have that I think is helpful to others is not, “Oh, find a growing market.” But that if you find a market that other people feel doesn’t have potential because they think it’s slimy or embarrassing or awkward. What’s a good example of this? Oh, okay, do you know the table game Dungeons and Dragons?
Rand: Are you familiar with that? Okay, so that is a very nerdy embarrassing thing that like people, at least my generation, were extremely . . . you know, you wouldn’t talk about. If you did play, you didn’t talk about.
Andrew: I literally would make fun of the kids who played it.
Rand: Yeah, yeah. I remember when I was 12 years old. I tried to get some friends of mine to play with me because I thought it was super cool and they were like, “Yeah, we’re not your friends anymore.” And from then on I haven’t talked to them, right? If I want to read about it online, I read about it online but I don’t talk about it. So environments like that and SEO was one. SEO was something where everyone thought it was sleazy and scammy and sketchy. And environments like that, opportunities like that, markets like that are really, really interesting. And I think they are the ones that are under invested in and underserved. And that’s where I find a lot of potential opportunity. And I’ve seen it, you know, in a number of fields, right, so servicing, underserved populations, right? That could be . . .
Andrew: People who are locked up in jail. Incarcerated.
Rand: Yeah, people who were incarcerated. Absolutely. People who don’t have access to bank transfer systems and need other ways to move money around or to send it home to their home countries or . . .
Andrew: So people who are considered like untouchable almost, products that are untouchable for some reason, because they are disgusting to some people.
Andrew:Anything else that you’d say?
Rand: Yeah, I think that actually a lot of . . . anything that is outside of the world that typical investors touch themselves. So, gosh, there was a great example of this in in Emily Chang’s book “Brotopia,” where she talked about how folks would pitch venture capitalists and the VC would say, “Well, look, you know, this is like a product for women, right?” So I talked to my wife about it and she wasn’t into it. And you have that moment of, “Oh, my God, you have no idea what you’re doing as soon as we move outside of the realm of things you personally use.” And so I think that’s another exciting opportunity, right? If investor classes are not using something that usually means there’s opportunity there.
Andrew: Yeah, who was it? It was Dave McClure who said something like that. He said, “Everyone’s thinking about selling to 20-something-year-old guys, but there are moms who need products that these guys who can code don’t relate to and don’t know them. There’s an opportunity in that.” I get it. You know what? I always had this inferiority complex about podcasting because I felt like this is an inferior, not inferior radar. I knew it was superior but no one respects it. They respect YouTube more. And then Gimlet came in and . . . see, I do the same thing you do. Instead of talking about my triumphs, I only talk about where I could have done better. But Gimlet came in and they said, “We love podcasting. It’s so much better than working for National Public Radio. This is actually a huge opportunity,” and they’re growing it big.
So that’s what you’re talking about. Look for that. You did that with SEO. I remember when SEO was sleazy. I remember when like Neil Patel would touch it but he would kind of make fun of himself and people would say, “Okay, Neil can get away with it.” But I get it.
All right. Let me take a moment to talk about my first sponsor. And I want to come back and there’s something that I wish I’d gotten more into in your book. You said, “I got into consulting first. It’s easy to get started with consulting and get up and running. I shifted to software. What consulting allowed me to do was empathize with my customers so that I could build the right software for them.” I want some examples and maybe you had it in there and I missed it, but I’d love to see how doing the work for your clients led you to come up with good software that you couldn’t have done if you’re just seeing the market in analytical point of view from the outside.
All right. My first sponsor is a company called ActiveCampaign Do you know anything about ActiveCampaign? Dude, do you do email marketing much? Are you an email marketing guy or just a web marketing guy?
Rand: No, no tons of email marketing, yeah.
Andrew: And what’s one thing that’s worked for you in email marketing that . . . what’s one tip that you’d give us?
Rand: Very personal messages.
Andrew: Okay, so here is . . .
Rand: Yeah, the more you can personalize, the better the open rate.
Andrew: Perfect. Here’s how ActiveCampaign enables that. ActiveCampaign will allow you to tag your site, just put a little piece of code all over your site. And if you see that people are on one element of your site, exclusively, you could start sending them messages based on where they are on the site. Or if you have videos, you might have a video for someone who’s . . . do you have a two-sided marketplace at SparkToro? Let me see.
Rand: Not yet.
Andrew: No, but the idea is, who are the two sides that are going to be in the marketplace? Who are the two groups of people that you might speak to?
Rand: I suspect it will be publications and then marketers.
Andrew: Publication, not influencers?
Rand: Well, not as we classically defined that.
Andrew: Okay. Publications and marketers, right? So if you create maybe a Rand Fishkin whiteboard video for marketers and you see that there’s someone who’s watching three of those videos from start to finish, you want to tag them as being a marketer and not send them your general email newsletter. You want to send them something that’s customized to marketers. That kind of thing is usually so tough to put together the most marketers will not even touch it. They won’t give it a shot. It means that it’s spending a lot of money on software and getting involved in complicated features that no one ever uses or you spend 1,000 bucks on a consultant to do it, or you just give it up completely and you go for one of the dumb email systems and say, “I’m just going to email everyone and they’ll figure out what’s right for them.”
Well, into that fray walked ActiveCampaign, a company that’s been around forever and said, “You know, our job has always been about simplification. We’ll make all these features simple and easy to use.” If anyone out there wants to give it a shot, I urge you to not just go to activecampaign.com because frankly I will not get credit for you going there, I’ll be honest with you guys, but also if you go to the special URL I’m about to give you, they’re going let you try it for free so you can go through it. Have a cocktail or coffee or whatever. Watch them, something on Netflix and just go through it and get a sense of it so you can see how easy it is.
If you decide to sign up, they’ll give you your second month for free because a lot of software does take some consultation. They’ll give you two free one-on-one sessions. The first session you’ll lay out a plan. The second session you’ll come back in and say, “Here’s what I did,” and where it’s not working, where it is working and you’ll get to actually make sure that everything’s implemented.
And finally, if you’re with a different email software . . . I should see what SparkToro is on. I usually do a BuiltWith search on people but I forgot to do it for you. But if you are with a different email provider, they will migrate you for free. So what’s that special URL? It is, get this, activecampaign.com/mixergy. You have to know how to spell the name Mixergy and not type in Mixenergy or Mixology. But the reward for that is that you’ll get all those features, activecampaign.com/mixergy. All right. So the consulting thing made a lot of sense. How were you able to empathize because you did consulting and create software because of that?
Rand: Yeah. Well, so first off, you have to remember that this is back in, right, 2005, 2006. So the SEO world is very manual. It’s kind of a different world than it is today. But I think what we got to see is we got to see things that we had to do over and over and over again repetitively manually for client after client after client. So there’s lots of differences between all these different businesses that we did work for, but there’s a bunch of similarities as well. And as a consultant, you get to see the similarities and the differences. And where software and any type of automation can help is on those similarities.
Andrew: What are some of the similarities that you noticed as you were doing the work? Do you remember or is it been too long?
Rand: Sure. Yeah. And so everyone needed a report of the keywords that they were ranking for, and the metrics of the websites that ranked for them and how they compared, right? So we were building that same report over and over again.
Andrew: And you would sit down and you do Google search, and then you’d find that the location and you put in a spreadsheet, really?
Rand: Oh, yeah, totally. Because you had to do it manually for several reasons. Because all the automated solutions at the time were pulling from this one Google Data Center that wasn’t always the same one that was active. So there was that and personalization and all these other things. But it was also the case that different types of results will display and sometimes you wouldn’t catch up. So you had to do it manually because the crawler . . .
Andrew: So you would say you would do a search and then another search and another search just to kind of . . . is that right?
Rand: Yeah. You take each one, you put it in a spreadsheet, and then you go to all these different tools, like you’d go to the Google PageRank toolbar and you click on every result in the SERP and you get the number from the PageRank toolbar and you add that to each, you know, URL and then you go to Alexa. At the time, right, it was terrible. It’s still even worse now. But, you know, at the time we’d pull Alexa data and we pulled comScore data, a few other ones, right? We put all these numbers into the spreadsheet and then we try and show them. Or we go to Yahoo and get the link data . . .
Andrew: By the way, is this you personally doing that?
Rand: Yeah, yeah, me personally, or I had a few sort of consultants who were working with me once we got to ’06, ’07.
Andrew: Okay. And so you are manually putting that in. You realize this is a pain. This could be automated because it’s repetitive.
Rand: Yeah. So Matt, our developer at the time was like, “Hey, man, I got you.” And he built us a little tool so that we could do this in an automated way wouldn’t take as much energy. And then I said to Matt like, “Hey, man, I want to open source this. Like I want everyone to be able to use this.” And he’s like, “No, it’ll burn down our servers. We can’t do it.” So I said, “Well, what about a paywall? We’ll make them PayPal this.” And that’s how Moz got into software.
Andrew: PayPal. They PayPal you and then you give them access to this paywall, and he built a software. By the way, you refer to Matt in the in the book. Can I say who Matt is? Or can you say who Matt . . .
Rand: Oh, yeah, yeah, yeah.
Rand:Matt Inman. Yeah, he worked at Moz for like four years with me and we used to hang out all the time after work and stuff. He started “The Oatmeal,” the comic series after that.
Andrew: Okay, so you guys, did that. Did he create the software? Was this all on WordPress?
Rand: So we were not on WordPress. We were custom built. So, yeah, he built a website. He built the initial version of the tools that launched in ’07. And then I think he left maybe in the summer of 2007. And we had a few other engineers who took over after that. A guy named Jeff Pollard who I think now is with . . . he’s actually down in the Bay Area with Discus.
Andrew: Look at this, by the way, one of the first versions of your site. On the homepage is “What is search engine optimization?” And you got three paragraphs explaining that. You also have “What is SEOmoz?” And you explain that. And then you’ve got some sponsors like Text Link Ads. Do you remember them?
Rand: Oh, my gosh. So that was a very, very brief period. I think we had like four months one year where we tried doing sponsors for our blog and Text Link Ads, of course, bought a bought an ad. It’s funny that you can still find that, yeah, back on the Wayback.
Andrew: Because they would sell links on people’s sites because back then that would help with Google credibility, right?
Andrew: Wow, I didn’t realize that you gave up on ads. Okay. So I see the software work. It started to work for you. At what point did you say, “This is going to be big. We should start to shift away from consulting to that”? And what made you shift?
Rand: I think it was July, June or July, so, you know, five, six months into having this software subscription when we looked at the numbers and realized that we were going to make about the same dollars from subscription revenue that we were making from consulting. And we’ve been trying to make consulting take off for six years and we had started this earlier. So that’s when we said, “Oh, hang on a sec. This subscription thing is kind of exciting.”
Andrew: Right. Let’s get into Project Carhole. Where did the name Carhole come from?
Rand: So there’s this old “Simpsons” episode back when the “Simpsons” was great. And Homer is playing cards with a bunch of guys and he says, “Oh, I got to go out to the garage.” And Moe says, “Garage, garage. Whoo. La dee da, Mr. Fancy Frenchman.” And Homer says, “Well, what do you guys call it?” And Mo replies, “A car hole.” That’s where it comes from. Because Carhole was our name for this much less fancy version of Google’s link index that we hoped could make linked data and our own version of page rank and all these metrics, more transparent for web marketers and SEOs. And in fact they work great once we built it and launched it.
Andrew: Because you wanted to . . . you said, “Look, Google just gives you the results without giving you any insight into how those results happen. We’re going to mimic Google and give you all the data.” I didn’t know this, you and your grandfather used to pour over a Google patents to understand SEO?
Rand: Yeah, that’s exactly right.
Andrew: How did you grandfather know this stuff?
Rand: Well, so my grandfather was a was a chemical engineer by trade. And so, you know, very familiar with patent applications and processes and a heavy math guy. And he’d always helped me with my math high school homework. So when I came up against this, you know, I spent a bunch of time with him. He actually came with me to some conferences and events. My grandfather’s now 91 and, Andrew, he just came to the reading. He and my grandmother both came to my reading in New York where launching the book, which was . . . that was an amazing feeling.
Andrew: You wanted to make him proud.
Andrew: Maternal or paternal grandfather?
Rand: These are my paternal grandparents. My maternal grandmother unfortunately passed away a couple years ago.
Andrew: Sorry to interrupt. This is your dad’s mom and dad. Meanwhile, you and your dad are not talking.
Andrew: Still to this day?
Rand: Well, I mean, maybe every year or so but not a lot.
Rand: Well, I think we are people who maybe trigger each other a little bit and don’t get along particularly well and have very different sort of perceptions of the world.
Andrew: How does he trigger you? I thought that was an interesting story in your book where you said, “My mom and dad were arguing so much about how my mom did not reveal that she took on all this debt for this business that I started with her.” And I thought, “Interesting.” And then you said, “I put my earphones on and I went to hide my room.” And I go, “He’s still in the house with his dad. He’s not talking to . . . working with his mom.” No?
Rand: Sorry, Andrew, that’s my little brother.
Andrew: Oh, God, it’s your brother who’s doing that. Okay.
Rand: It’s my little brother who conveyed that story to me.
Andrew: Got it. All right. Okay. So you’re not living in a house with them. But still, it’s really awkward, huh?
Rand: Yeah. No, I mean, I think this is, you know, when you dig into a lot of family run businesses, especially ones that have strife and turmoil, you find a lot of these stories. You know, I wish that Moz and my story were unique in that facet but my experience has been that that a lot of people who have businesses, family co-founders have these kind of really hard situations.
Andrew: Can I say this? This is this is not where I meant to go. So tell me if you want me to back off and I promise I’ll get back into the business. I remember talking to an angel investor who just like just said, “Rand and his mom are going have to work things out over there because that’s just not going to fly or whatever it is.” I didn’t know that you guys are having issues. Were you guys having open issues you? You mom when you guys were running the business together?
Rand: Let’s see. Smaller ones.
Andrew: But not like big fights, no?
Rand: No, no, definitely not. I mean, certainly not while she was CEO and then I think probably the hardest two conversations we ever had and, you know, the biggest points of tension where when Ignition wanted to invest they basically said, “Hey,” We want to put this money in. We want to back you but, Rand, we need you to be the CEO not Gillian.” And so then I had a long conversation with my mom about like. “Hey, you know, you’ll have to step into this other role, sort of president, COO and, you know, I’ll be the CEO.” And that was a very tough discussion but it was a very emotional discussion but she was actually not really awesome about it.
The other really hard discussion was when Foundry came in 2012 and we asked Gillian to step off the board of directors. And I think that was a much harder conversation because she wasn’t immediately sure like, “What am I going to do? And how am I going to, you know, do things professionally?” And thankfully Moz was still growing at a very high clip at that point. So she ended up selling a lot of her shares. And now she’s an investor.
Andrew: Probably [not because 00:32:29] she got to do it at that point. But then that doesn’t tell me that you guys had a good working relationship if she needed to leave the board of directors, right?
Rand: Yeah, I would say not a . . . I wouldn’t call it a good working relationship but I also wouldn’t say like we weren’t actively not talking to each other like I would with my dad or like having particularly . . . we didn’t have very passionate disagreements about the business itself. It’s more like, “Well, are you the right person to be on the board of directors?” I think was most of the conversation at.
Andrew: Okay, let’s go back to Carhole. Frankly, I feel a little yucky even bringing this up. Why are you okay with me bringing up? I’m checking in with you and every time I check in to say, I saw as I said yucky you go, I saw your face, you were like, “Why would you feel yucky bringing it up?” I would turn the question around to you and say, “Why are you comfortable talking about this stuff?”
Rand: So I think there is inherent value in being honest about these things that everyone else tries to cover up. And I recognize that, you know, that removes a little bit of privacy for me and from these other people that I might be talking about the professional and personal relationships. But I don’t think enough entrepreneurs or investors or anyone in the startup world tells you the whole story. And until you have the whole story, until you have context, until you know these relationships and understand what it’s like to, you know, walk around a block for six hours talking to your mom about how she’s not going to be CEO of the company that she built and has run for 25 years, you know, without that context, I don’t think I don’t think people can truly internalize what this feels like and why all the other things that come from entrepreneurship that you and I have seen so many times that I’ve experienced, right? Anxiety, depression, lashing out in anger at people irrationally, not being able to process your emotions, right? Because you have all these all these layers of things sitting on top of you.
Andrew: You don’t understand it until you understand that goes on underneath. But forgive me for asking, what do you give a rat ass about whether people whether people know? I know why I would give a rat ass. My goal here is like this is a site where entrepreneurs learn from other entrepreneurs. I know why I care. You’ve marketing software. Why do you need to be the guy who stands up and says, “Hey, everyone, look, I’m going to tell you about my bad marketing and my successful marketing and how you could do well. And, by the way, I got this thing on the side with my mom.” Why does this help your brand? Think about the Rand Fishkin brand.
Rand: It doesn’t help my brand. That’s not why I do it, right? Andrew, I do it because I’m a human being and I want other human beings to lead better, happier, more successful lives. Fundamentally, I don’t know what our purpose is on this planet if not tend to raise each other up. So this is an obligation that I have as a person, not an obligation that I have, or sort of a marketing tactic to help me brand-wise.
Andrew: Okay. All right. It does make you a lot more likable. I’ve got some people I can think of who I’ve interviewed who are just nothing but marketing machines. And I could see that they do better in that. But yes, I make that look internally. All right. So project Carhole. I get where you came up with the name. The goal was to kind of give people more insight. What happened when you launched it?
Rand: Yeah. I mean crazy enough, we launched it the day Bear Stearns collapsed. I think that was, what was that? Sometime in October of 2008, right? So financial collapses sort of all around us. Newspapers, all the all the press that was supposed to write about us sort of bailed. And yet two months later, we were profitable again.
Andrew: Because of this tool.
Rand: Because of this tool. This tool launched. You know, we launched it at this conference in New York. And it just sort of took off virally, right? Folks said, “Oh, my gosh, we can get linked data again and thanks to Moz.” And so they subscribed and signed up and we passed 2,000, and then 5,000, and then 10,000 subscriptions. And we grew at a tremendous clip between 2008 all the way to 2013.
Andrew: You know, so I’m hunting through the Internet Archive as we’re talking about this stuff. I see even early on your site free SEO tools. There was a period there where if you created a tool, you got a lot of links and then that supported the content. Is that the original goal for the tools to get links to support the content and then it was we should charge for this?
Rand: The original goal of the tool was twofold. One, I really wanted to show all my SEO friends this cool thing I build or Matt had built with my designs. And two, I hoped it could bring us consulting clients, right? That was the initial idea.
Rand:”Oh, we’ll build those tools, people will see that we’re good at this stuff and we have automated processes, and they’ll come to us for consulting.” And then of course, we realized, “Hang on a minute, it’s way more profitable and more scalable if we drop consulting entirely.” And actually consultants I think we’re about 40% of our customers.
Andrew: Look at this. Look at all the tools. Backlink analysis tool, average runtime 12.5 minutes. Site analysis and comparison tool, average runtime 9.5 minutes. It’s like, “Hey, guys, we have this . . . ” it’s like a dozen tools that I could see here, Link pricing tool, Link discovery tool, etc. But yeah, it’s kind of interesting that I can get a sample report, but it takes a little while for this tour. Okay. And then these other guys came in like Ahrefs. I’d love that you actually give us the pronunciation for Ahrefs in your book and Majestic. What happened with those companies? How did you guys fare against them and why?
Rand: Yeah, so between probably about maybe the end of 2012, start of 2013 and 2017, actually just a few months ago into 2018, we went from sort of best in class on this, you know, provide you with link data to the worst of the big ones, right? There are probably a few smaller competitors who were not quite as good as us. But really the worst of the big ones on a few vectors. On size of index, so coverage of all the links that we knew about versus what our competitors knew about. On speed, so being able to quickly bring you new links as they happened and on quality of the links that we could expose you to. And that made us really suffer in the minds of a lot of SEOs. I think a lot of professional hardcore SEOs who work on link building specifically said, “Moz is an also-ran. They’re a has-been.” And meanwhile these other companies, you know, grew tremendously.
Andrew: What could you have done better? Focused on it?
Rand: Yeah. So I think the biggest thing that that I would do, you know, transported back in time, I would say, “Stop trying to do these 20 other things. This is the problem we need to solve. We need to not be an also-ran for five years on this. We need to be best in the world at this.” You know, and I think that could have been possible had we focused on it, but wasn’t to be.
Andrew: You know, I didn’t realize. I like this insight into how the business is doing. It’s so hard to tell from the outside because frankly you could say, “Look, everything worked here, all these tools that we created over the years and make the transition.” In my mind, I always see it that way. You always tell me, “Look, Andrew,” every time I interview you, every time we talk, you say, “Andrew, here’s a little bit dose of sanity.” And Andrew always thinks of you as someone who’s just doing this great stuff and I’ve got to align my head but with the reality that you’re sharing with me.
But before I let this in, I was thinking about how Brian Harris a guy who I really like is kind of following your old model and I thought he’s going to follow it to Rand’ success. He’s really into email growth and he’s got all these email tools. I can’t frickin’ remember the names of their tools. But I thought he was assembling a collection like you were and that he was on the right track with it. But maybe now from this interview I’m thinking he should pick the one that works best and just go with that one tool. Make it as powerful as possible and back off with others.
Rand: Yeah, I think there’s a lot of value to be had from being best in the world at something as opposed to kind of good at a bunch of things, right? And especially in . . . well, I’ll say, especially in SEO, right? So you know how SEO works. You get to the top of Google, right, their very first result, and you get the lion’s share the clicks. If you’re anywhere further down than that, you get fewer. And so whether you have to pay, you know, 200 bucks a month more and learn two extra tools, that doesn’t matter compared to being able to move up one position.
If you can be slightly better than your competition and outrank them, you’ll jump through any amount of hoops. And so in hyper competitive, you know, fields like that, having the best tool really does matter. I think it’s probably different for a lot of other things, right? So payroll software might be an example. Now I struggle through the one I’ve got because what the heck, they all kind of do the same thing as long as everyone gets paid. And it’s like not a terrible pain in the butt. The HR person can deal with it. We’ll just stay with the one we’ve got even if there’s a better tool. SEO, not that way.
Andrew: Okay. I’m going to read . . . in fact, instead of doing an ad for my second sponsor, the second sponsor is a company called Toptal. It will help you hire your best developers. I’ve got to tell you, in my notes here, I didn’t know how to sum up what you said about hiring as a non-developer. What I wrote was for myself, “See page 83 whenever you’re hiring.” Now page 83 for me is going to be different from page 83 for everyone else because your team did help me out. They gave me an early copy of the book.
What’s your advice as someone who has hired more CTOs than . . . I don’t know, four CTOs, what, in six years or something. You said you struggled with that. Hiring developers was a bit of a challenge. What advice would you give anyone who’s listening to us? And we’ll kind of make that the paid ad for Toptal?
Rand: So you have to be willing to look really dumb to other people around you. Right? You have to be willing to ask dumb questions. Recognize that you don’t understand the subject matter. Have people explain basic concepts and terminology to you. And be okay with the fact that the junior engineer sitting in the room with you is probably going, “How the hell is that guy to CEO? I thought this was a software company. That dude doesn’t know shit.” Right? And that is a deeply uncomfortable thing that most CEOs, most founders are just not okay with.
Andrew: Yes. That’s not my homework to do. You also tell us in the book. You’d need to do the homework and go and look this stuff up. But you’re saying, “If you don’t know the answer to that, just fess up.”
Rand: Fess up, look dumb to your team. Be willing to look dumb to your team and ask questions. Because you’re not actually dumb, you just don’t have this specific knowledge set And learning this specific knowledge set and understanding this stuff deeply, even if you can’t specifically do it yourself, right, getting to that sort of level two knowledge of where, “Oh, okay, I have a fundamental understanding.” I could be sit in a meeting with engineers, even if I couldn’t write the code, but I could sit in a meeting and I could understand all the different points they’re making and who sounds like they’re making reasonable ones and who might be BS-ing me. That’s the only way you’re going to be able to hire successfully to get people who can work on these projects and products in an effective manner. You can absolutely hone the skills.
Andrew: One of the things you said and then I’ll close out this Toptal ad, you said, “Hire a CTO who can teach.” I wanted to ask the book, “Why? What did I miss with that?”
Rand: So the why behind teaching is because in order to teach something, you have to have a deep fundamental understanding of it, right? To do something you don’t always, right? You can sort of muddle your way through it, but in order to teach it you have to understand the fundamentals. And if you if you have a CTO or a CMO or Chief Product Officer who can upgrade your knowledge, who can teach you all these things that you don’t know, then you have someone who can help you get to that level where you’re going to be able to, well, a), hire their replacement if and when the time comes, b) call BS on the team if you need to do that, c) know how to design projects and strategies around that stuff. It just creates for a tremendous amount more success. And I see tons of entrepreneurs who don’t know a field and aren’t willing to admit that they don’t know and it costs them.
Andrew: All right. I’ll close this out guys by saying, look, if you’re hiring a developer, I know how tough it could be, frankly, hiring anything, anyone, any role in this environment is really tough. Developers are especially difficult always. That’s where Toptal comes in. If you go to the special URL, you’re going to get 80 hours of Top . . . I should be clear top as in top of your head, Tal as in talent. Toptal developer. So you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period of up to two weeks.
You go to toptal.com/mixergy, you click on that green button and guess what? You’re not committing to jack. What you do is you get on a call with Matt of Toptal. You them what your issues are, what you’re looking for. They have this phenomenal network of developers. They will match you up with three developers, sometimes even as little as two, who they think they’re going to be a perfect match for you. Find the right one and then you could hire them. There’s no commitment.
They want you to be 100% satisfied. They raise money from Andreessen Horowitz I think once and then they stopped because they won’t let me give you their numbers. They’re not like you. They’re not open. They’re the anti-you. They do not want me to reveal anything. Like I saw the way they organize their Slack. I liked it. They go, “Andrew, we won’t talk to you. We won’t be you friend anymore if you share how we organize our freakin’ Slack.” They’re paranoid. All right, toptal.com/mixergy. They’ll introduce you to great developers.
Let’s talk about management. You had this thing in your book where you said, “Management for a long time was everything’s in Rand’s head. And then we got to . . . ” I forget how many dozen people. And I said, “I’m going to talk with all of you once a quarter and teach you where we’re going so that everyone’s on the same page.” And then that didn’t work and you ended up going to once a week. And then why didn’t that work even? Why didn’t any of that work? And then finally you guys scrapped the whole thing and you went in different direction. Talk to me about that because this is where your book is so good, management for CEOs, for founders.
Rand: Yeah. Yeah. So I just I described this process of muddling through, right? The muddling through where you basically you encounter some problem, you try a bunch of things that don’t work, and then you eventually find some way to end around the problem entirely, or you figure it out enough that you can, you know, hobble your way through it. And I think internal communication was absolutely like that for us, right? So we had this fundamental flawed belief. I had this fundamental flawed belief that everyone in the company should understand what everyone in the company was doing, right? I think that’s actually a very good idea when you’re five people. It’s probably still a good idea up to about 30 people and then it becomes a bad idea around 60 or 70 people.
And this was the problem is that we were trying to create this internal communication where everyone would know where we’re interested in. And what eventually ended up working after not just my trial and error but our current CEO as well was that we stopped trying, we stopped trying to make that work and shoehorn this in and instead got to this place of, “No, you know what? Once a quarter we will have a discussion about things that are exciting that have launched, but you don’t need to know what this team is doing. You don’t need to know what that team doing. If you’re curious, you go ahead and ask them, right? But we’re not going to try and broadcast it to you. We’re not going to try and overwhelm you with communication because then you ignore the important stuff.”
Andrew: All right, that makes a lot of sense. Okay, boy, there’s so much I want to get to. I’m going to miss a lot of this stuff.
Andrew:Flywheel verse growth hacking. You do start out with a quote from Andrew Chen. I’m very intimidated of Andrew Chen. Like seeing them socially and I just feel like he’s such a serious guy. Don’t you feel like showing Andrew Chen quote for what growth hacking is and then saying, “Here’s where it doesn’t work. And I think it’s . . . ” Don’t you feel like you’re going to get into an issue with him?
Rand: Yeah, yeah. I mean, I hope so, right?
Andrew: But you’re okay with that.
Rand: Yeah. So it’s not that I don’t care. It’s that I think the desire for social cohesion holds us back from being as critical of each other as we should be. And that critical discussion is actually very important to making our field a better place. And I worry actually, the geographic density of the San Francisco and they are in tech world, I think prevents people from speaking out against things that they think are wrong.
Andrew: Yes. Product Hunt comments are the perfect example of that. Everyone is in there. So I went into Product Hunt, and I thought, “I’m going to save Product Hunt by being the one critical voice in there and actually sharpen it.” And I remember I did it with a friend of mine, Jonathon Triest [SP]. I don’t know him that well actually. I should say a friend because especially not after this. I went in and I said, “You did this video show that looks really polished, but here’s all the problems with the show.” And then I close it out by saying, “Was it helpful?” And he didn’t respond. I go, “Boy, this guy just doesn’t know how to respond.” And then I thought about a week later and I go, “Nobody needs me to come into Product Hunt and like say all this.”
But you’re right. As a result, everyone is just being complementary because we’re all in the same world and you’re right. Okay. So you decide I’m going to say here’s the issue with growth hacking. Define growth hacking and then explain why that’s a problem. And then let’s talk about the Moz marketing flywheel and why a flywheel is better than growth hacking. What’s growth hacking?
Rand: Yeah. So fundamentally, I think . . . I don’t know if Andrew intended it this way but certainly the way it has come to the viewed, growth hacking has come to be viewed is we will seek out this one sort of tactic, right, tactic that is generally hacky, meaning that it doesn’t scale particularly well. It doesn’t create inertia. It often violates something, decorum or a terms of service or the law temporarily, right? You can think of the Airbnb hack, right, of scraping Craigslist or the Uber hack of, you know, calling Lyfts to fake locations, or sort of bribing city officials by getting a bunch of involved in pop political campaigns and that sort of stuff.
Andrew: Or you know what? If we’re pointing fingers at them, we could also point fingers at you, that email that you sent out I don’t know that I would call it a growth hack. What was in that email?
Rand: Yeah, yeah, yeah. So the $1 email offer, right? This this one time, you can try Moz for $1. But there’s only 5,000 spots. And we’re going to put it on the blog in two days. So you better act now. Total growth hack, right, create this false sense of immediacy and urgency. You know, create a limited amount of slots even though, you know, we only filled up those 5,000 whatever, right? And would we have really cut people off if we had gotten to 5002, really? Could have been like, “No, you two don’t get it.” So yeah, a bunch of . . .
Andrew: And then send another email saying, “I screwed up that last thing. Here’s what I . . . ” right? And then you got even more people. Okay, so that’s like the thing about a growth hack is it works one time and then here’s another distinction you said in the book, it doesn’t make the product fundamentally better.
Rand: No, it doesn’t make the product better, right? It doesn’t make the marketing of the product actually better. It might bring a bunch of people to your doorstep, but the house is not nicer or bigger or more worthy of talking about, right, than it was then it was yesterday.
Andrew: Okay. So then Moz flywheel is what? The marketing flywheel that makes the product better and helps market.
Rand: Yeah. The idea of a flywheel . . . and it doesn’t have to be Moz’s, right? Anybody’s marketing flywheel. The idea fundamentally behind it is that it takes a lot of energy to get that flywheel going, right? The analogy is to this giant piece of machinery that existed in the industrial age that would store up kinetic or electrical energy, right, in a giant wheel. And then you you’d extract that energy from the wheel by slowing it down. But it took an incredible amount of energy to get it to turn once. But then once it started turning, turning it faster and faster, was inertia based, right? It was easier and easier.
And that’s exactly the way great marketing works. It should be hard to start turning, it will be hard to start turning it initially. But over time, right, it’s, “Oh, I went on this great program. I had the best interview I’ve ever had is by this guy Andrew Warner. And I’ve been interviewed by a lot of people, right, but this guy was the best one and he’s who I wish would do my book reading.” Okay, now that starts the word of mouth flywheel around Mixergy, right? And that’s really hard to turn in 2006 or ’07 when you first were doing this?
Andrew: Yeah. Yeah.
Rand: But then over time that flywheel because there’s more and more people who’ve been interviewed by you, and more and more people who’ve seen some of those interviews, and by the time you get to interview number 100, the flywheel is spinning and now turning it faster requires less and less energy. It’s not nearly as hard to turn it one more time to get the next thousand visitors as it was to get the first thousand. And that’s how a flywheel should function.
Andrew: You k now what does it well is I think Zapier. Every time Zapier gets another software vendor to incorporate Zapier and use Zapier to connect their software with other people’s software, they asked that company to email their audience. That audience then finds out about Zapier and then they help get Zapier more integrations and each integration gets the more publicity and it becomes this flywheel. For you guys it’s just . . .
Rand: Right. So theirs is an email marketing flywheel, right? Moz was a content and SEO flywheel. You know, I think I talked about in the book, The Dollar Shave Club guys who had basically a video and PR flywheel, right, or Dribbble the web design community that essentially as a user generated content and discussion flywheel. All of these are great and you can build whatever flywheel you want.
Andrew: You know, could you describe the Moz flywheel? Because I feel like when you talk about Dollar Shave Club, I remember reading that. It’s like in my book, it’s at the top of the page. Kind of weird when you read a book and you remember where the text was. But I remember exactly what I felt at the time. They had a viral video. You can’t really reproduce that. That feels harder to attain, not unattainable or harder to attain. Versus the Moz marketing flywheel. This is one that you created for yourself. Even if you don’t hit on all the points, if you just described how it works, I think it’s more replicable.
Rand: Yeah, yeah, absolutely.
Rand: Yeah, imitable [SP], for sure.
Rand:And it’s a very popular model now, right? The content marketing strategy. So we would basically . . . you know, I’d have some intuition about what people were talking about, what they were interested in. I do a little bit of keyword research. I publish a piece of content. Then I, you know, do outreach to all my audiences, broadcast and individual. So maybe I’ll email a few folks individually who I thought would be interested in the piece and it would go out to our, you know, blog subscribers, and it would go out on our social channels, and then that would earn amplification, and then people . . .
Andrew: Amplification meaning they link to it to Twitter accounts or on their sites, ideally, etc.
Rand: Yeah, they link to it, they retweet it, they reshare it on LinkedIn or on Facebook or what have you, right? And then each of these people who are reached is potentially another person who might subscribe, right? They might subscribe to get blog updates like, “Oh, that was really good. I need to learn more about this. Let me subscribe to the Moz blog, or let me follow them on Twitter, or let me follow their account on LinkedIn, or let me follow this random guy on Facebook,” or whatever it is, right? And then the website itself, moz.com, would earn that amplification, which would tell Google this is a more authoritative site, slightly more authoritative than it was yesterday before all this activity. And so we could rank better for more and more keywords. Then we publish again. From 2004 to 2006, not a lot of activity, right? Hard to break 100 visits a day.
Today, you know, if I want 10,000 people to see something, I don’t have to do much. I just hit publish, right? Because the engine’s been built. The flywheel has been building for, you know, decades, 15 years now. It goes on its own And I think that the point I tried to make in the book is that growth hacks do have great value. Growth hacks are invaluable when you find a point of friction in your flywheel, right? So this thing’s humming along, except you can’t seem to get traction with, you know, these influential people in your industry. And so you’re getting stuck at the amplification part of this. And so that’s when a hack like . . . I talked about a couple of content projects that involved a bunch of influencers in the SEO field, you know, back in the day. That’s when a hack like that is truly valuable, when it can accelerate the flywheel.
Andrew: So you’re not saying, “Never do any of these growth hacks.” You just saying, “Look, this is not a thing to base your business on?”
Rand: Yeah. I mean, another thing that Andrew Chen, one of my favorite things he’s ever done is created the law of shitty clickthrough rates, right? You abuse something, you know, you use some tact or whatever. And like it starts out being successful and then over time it falls to negligible, nearly worthless, right? And that’s why a lot of advertising, you know, hype advertising stops working or specific tactics. All the “one weird trick to lose weight fast” those ads, that kind of stuff. And this follows that same law.
Andrew: Here’s the thing, I’m not going to talk about, I’ll just let people read in your book, but I wanted to make sure that I understand this right. You swapped lives with the founder of Seer.
Andrew: You lived in his house, exchange passwords, you answered his email, did his work for him and he did yours?
Rand: Talk to his mom on the phone, walked his dog, went to his charity events.
Andrew: You know what? I can’t help it. Why? What was the goal for that? And then what did you get out of doing that?
Rand: I mean, this was really one of those late night bar ideas that just came to fruition, but what we got out of it was an incredible amount of empathy for each other’s lives, right? And for me, personally, I got back to those roots that I had in, you know, 2005, ’06, ’07 of consulting where I went, “Oh, this is why.” I finally understood why people were switching away from Moz’s tools because what they did not care about was, “Oh, all my tools are all on the same platform in the same place.” What they cared about was, “I want the best thing and the best data and I’m willing to use a bunch of different tools if that means [inaudible 00:59:14]”
Andrew: How did working at Will’s company gives you that insight?
Rand: Because I got to spend time with the, you know, 80, I think at the time consultants.
Andrew: And they were all . . . yeah, I’m looking at my interview with him at the time I summed up Seer Interactive as a fast growth, dynamic search marketing agency. So they were using the software. So it’s basically sitting in the shoes of one of your clients.
Rand: Of like 40 of my clients, right?
Andrew: Of 40 of your clients. Wait, so, you know what? I will go a little bit deeper in this. So you saw that they were willing to use lots of different software, how? Talk a little bit more about that.
Rand: So, I mean, I was sitting with actually a young woman who I just got to see her again. She was in Madrid with, well, for this conference, Teresa. And she was like showing me their process, right? So I sat down with her for 30 minutes. And she was like, “Hey, I’ll show you our link building and outreach process.” I sat down with another woman who’s working for Will, and she was like, “Hey, I’ll show you our keyword research process.” And, you know, someone else who showed me their Google AdWords process and a bunch of different things, right? So I got exposure to this and then I had phone calls, you know, acting as the CEO. I had phone calls with their clients. So I got to see the reports that the consultants gave to the clients and the advice that they were giving on the phone and the questions the clients were asking and the sales process, all this stuff.
Andrew: You know what? I never thought of that. I think I was just too taken by the novelty of it and didn’t see through the details of it. I’m glad I asked. All right, I’m going to close out with this. I’m going to disagree with you. Since we’re disagreeing. You say, “Don’t launch an MVP, launch an EVP.” Why? What’s an MVP and what’s an EVP and then why?
Rand: So I really like the classic illustration which I bet you’ve seen of, “Oh, you want to build a car, start with, you know, a two-wheel scooter, and then build a bicycle, and then build the bicycle, and then build the motorcycle, and then maybe a top tuck, and then get to a car.” And here’s the problem with a two-wheel scooter, no one can give you feedback about whether the brakes are good. No one can tell you whether it’s actually solving the problem of getting them there fast enough and costing too much in gas mileage. You think you’re learning a lot from an MVP, but my experience is you’re just learning what the next stage that you have to get to is and it’s only once you get to a product that truly does an exceptional job of solving people’s problems, it’s going to get them to switch from their existing solutions that you’ll get the feedback that will really upgrade you.
So I think an MVP is awesome in two situations. One, you’re extremely early stage, no one’s heard of you. Fine, you have no reputation to burn. Go ahead and meet the tiniest MVP. You can start integrating and learning. Lean Startup is awesome for that. And two is when you’re bigger and you have a reputation to lose and cost yourself, build it internally behind the scenes and have people privately giving you feedback, you know, private alpha, private beta, but don’t launch that publicly. Don’t associate your brand with a crappy version of the product, a minimally viable version of the product, associate your brand with an extraordinary product.
Andrew: Or exceptional viable product. That’s what a VP is.
Andrew: Okay. So here’s the disagreement, I think actually you and Eric Ries the creator of the MVP concept, I think you’re on the same page.
Rand: Yeah, we are.
Andrew: I think . . .
Rand: We talked about this in person.
Andrew: Yeah. So I was at his house and he talked to me . . . you gave the example of Tesla. Tesla could not create a minimum viable product. You said, “And I was thinking of how he told me how he worked with a car maker,” and I won’t give much details because it was a private conversation but he said, “They would just create the thing, the product for the inside of the car without testing it. We came up with this crappy version. We put it together in the car that we could put together,” and he’s not a car maker. And then he took it out to people and let them experience it.
He’s not saying with an MVP, create it and then put it in all your cars, General Motors, or Ford, or whoever. He’s saying minimum viable product should also go to the right audience. Here’s the thing though, that I’m so curious about with him, but I only know him socially so I don’t feel comfortable bringing this up. I should just bring it up. He’ll be happy with this. Now that I mentioned it out loud I realized I should just bring it up to him.
Rand: And he’s awesome dude. He loves critical feedback.
Andrew: Even in private. I think he’s okay with this. I think he’s not defending the Lean Startup methodology anymore in the startup world, because I don’t know why. But when people come in and say, “This doesn’t make sense,” he doesn’t do what he did in the past, which is write a blog post explaining it. I think he’s moved on. He’s moved on now to talk about Lean Startup to bigger companies and he’s moved on to create the stock market that he’s working on, right?
Rand: Which is amazing.
Andrew: Right. I wish that he would stand up and say, “Look, this thing still works.” I like when Peter Thiel disagrees with him that he comes back and says, “I don’t see disagreement here. I studied the companies that Peter Thiel invested in.” I think he’s just being contradictory. But at least explain it. Explain disagreement. What are your thoughts on that?
Rand: I mean, Peter Thiel is a horrible person and we shouldn’t give him any airtime. And besides that, my other thoughts are . . .
Andrew: I like that in your book you list specific investors who are hot. You say, “Most investors are great,” but you gave list of two people who are jerks.
Rand: Yeah. I mean, they’re jerks, right? I think they know they’re jerks. They’re kind of proud of being jerks. It’s fine.
Andrew: Oh, I got one of them. I’ll tell you in private. Oh, this is kind of cool. [crosstalk 01:04:39]. All right. Okay. So basically, bottom line what you’re saying is, “Look, guys, don’t want to crack.”
Rand: Eric, and I agree on a bunch of these things. The reason that I’m saying launch an EVP not an MVP is because I think that hasn’t been hammered home enough. And that too many people who read the “Lean Startup” and you look at the MVP methodology think, “That’s a great way to go. I’m going to build and launch an MVP.” And I want to tell you stop. You are burning your brand’s reputation by launching that MVP too early. Don’t take that thing that you jerry-rigged and put in people’s car to test out if it would work. Do not put that on the market. That is a testing process, and a learning process and is a great way to go but don’t sell it in auto parts stores.
Andrew: And you did that. You created a spam tool that lets you see what and then what happened when you did that?
Rand: Yeah. So we created this spam score. This was the previous version of the spam score tool. And it was a score from 0 to 17 that had all these flags. People rightly pointed out that it had a lot of flaws. We launched it anyway. We figured, “Hey, it’s an MVP. We want to get something out there. We think it can still be helpful to people if you use it in this particular way. It’s still good for this thing.” And I think it hurt our reputation. Made people go, “Their data is not that good. Can I really trust them? Should I be using this stuff?” It’s not good for all these things. I thought it would be useful for as opposed to, “Oh, I can see the promise that eventually, if they keep iterating on this, it’ll become something really good.” No one says that when they see a new product.
Andrew: Right. Okay. Unless it’s a smaller group of people. You know what? I’m not disagreeing with you on this, I’m soaking it in because I do enjoy just create something and not endlessly put it through everyone in your company and ask the world and I like to work that way. But I think I need to realize, you know, that’s not the way I need to work. I’m at a place where I shouldn’t be working that way in public as much.
All right. There’s a lot in this book that I didn’t cover. I’m looking for like screenshots of it. Here’s what I like about your book. I feel like you have the credibility to say, “Here’s everything that I don’t like about this space. Here’s everything that worked.” Like you have the credibility because you built a business and you also have the credibility because people are going to still like you if you say Kleiner Perkins is not a great company, right? I think that’s one of the companies . . .
Rand: Just look at the way they treat women who work for them. That’s all they need to know.
Andrew: Right. There you go. And you can even, like, disagree with Andrew Chen and the world will still like you. So I think you’re in a really good vantage point to do this. I really liked this book. I’m still going to say if you would have come up with a marketing book, you would have sold a lot more. If you would have come up with a book about depression, you probably wouldn’t have sold as much but people would have understood it. I think people don’t expect you to be as good a manager and a good CEO as you are because you don’t talk about it that much.
I’m going to say, I really like this book. I think it’s highly readable, full of personal like your own stories not theories and specific actionable things. Also nice drawings in there, which I’m not a drawing person because I don’t like how in the Kindle I can’t save the drawings to my Kindle highlights. Screw it. I took screenshots and I put it in my Google Doc and I like how open you are. Like, look at this. I got this whole chart going all the way back to 2007. How much revenue and how much cash burn you have. I don’t know. Like I feel almost like you’re the old man who’s like saying, “I could say whatever the hell I want. Fuck them all.”
Rand: Well, I will tell you this, right, one thing that’s beautiful is, you know, with this next company, I intentionally chose not to raise money from institutional investors. I won’t do it for this company. And yet, thanks to I think building a network of people who do believe in me and sort of have faith in this market and think it’s exciting and interesting, I was able to raise some angel dollars with in a very unusual structure. And so that gives me a little bit of the freedom and flexibility to be able to speak honestly, right?
If I don’t need Kleiner Perkins or Sequoia or Benchmark or whoever to or Matrix, you know, to say, “Hey, that Rand guy looks interesting. We shouldn’t we should talk to him.” I’m fine if they all, if anytime my name comes up they go, “That guy is terrible. He’s the worse. Did you hear what he said about, blah, blah, blah?” Fine. I get to be outside of that and I think that gives me a unique power to, you know, yeah, to your point, be the old man, right, who says [inaudible 01:09:14]
Andrew: Who’s like is still in the action. I don’t know Brad Feld but I have a sense you have a really good relationship with them. God knows, the guy talks about you a lot probably because you’re the only one he’s allowed to talk about because you get personal and you go, “All right. Fuck it. Why are you so weird about it? Talk about it. Tell everyone.”
All right. The book, available everywhere. Let me just repeat the title because we keep calling it the book and I know the good marketers actually would use a whole name of the book. It’s “Lost and Founder: A Painfully Honest Field Guide to the Startup World.” And I want to thank my two sponsors for making this happen. The first will help you do email marketing right. It’s called activecampaign.com/mixergy. And the second will help you hire your next phenomenal developer. So many of the people I’ve interviewed have hired from them. It’s toptal.com/mixergy. Thanks so much, Rand.
Rand: Thank you, Andrew.