A cautionary tale: Big money, bigger headaches

Admit it: You’ve had the startup daydreams.

They really kick in when you read that Company X just secured millions of dollars from a venture capital firm (for what seems like a pretty ordinary idea). “If I had millions of dollars,” the little voice in your head says, “I’d hit this one out of the park!”

Maybe. But few people know what it takes to raise millions of dollars (or even thousands of dollars) for that next great idea. Rand Fishkin does and, thanks to the cautionary tale he recently published about his own pursuit of a big round of funding, the rest of us know more than we did yesterday.

You can see it as a cold, wet blanket on those fanciful visions of Aeron chairs, catered lunches and hiring rock star developers by the dozen. In reality, it’s an amazing insider’s view into the twists and turns of raising money – especially big money.

Rand is the CEO of SEOmoz, a Seattle-based search marketing and technology firm. I first met Rand at an ONA workshop in 2006 in Seattle. He’s brilliant and his company apparently does amazing things (although I can’t say that I’ve worked directly with Moz). He’s also extremely generous and is always giving back to the startup community in Seattle. His latest gift is this blow-by-blow account of how his company considered new funding, went after new funding and ultimately saw a deal blow up at the 11th hour.

The world of venture capital can be difficult (if not impossible) to penetrate for outsiders. The level of detail Rand provides here is an incredible resource for anyone planning to deal with investors, whether you’re hoping to raise $25 million or $250,000.

In the end, Rand and his company are using this “misadventure” as a learning experience – just as you would expect a good startup to do. His summation:

What I can say is that this experience makes me and the rest of the Moz team even more inspired and motivated to build an amazing company. We can’t help but feel passion for proving doubters and naysayers wrong. The greatest revenge is to execute like hell, bootstrap all the way, and do what we said we’d do – become Seattle’s next billion-dollar startup, and make the world of marketing a better place.

With chip firmly planted on shoulder, Rand and his team might be better off now than if the $25 million had come through. The experience cost of going through the process was steep, for sure. But in the end, probably way more valuable than a bigger office space, new desk chairs and a fridge full of Red Bull.

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2 Responses to “A cautionary tale: Big money, bigger headaches”

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