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Rand Fishkin

How do venture capital deals fall apart? Those who want the inside scoop should look no further than Rand Fishkin’s more than 5,000 word treatise on how a recent $24 million venture deal with an undisclosed New York venture capitalist fell through.

I’ve covered the venture capital beat for more than a decade, and I can confidently say that I’ve never read anything quite like this. The SEOMoz CEO said he wrote the piece so that others can learn from the experiences and “possibly avoid some of the mistakes, pitfalls and pain we faced.” But I get the sense that the essay is a bit cathartic for the entrepreneur — who despite admitting some mistakes along the way — feels a bit burned after the New York VC firm pulled out of the deal at the last minute.

He writes:

“Phone calls and meetings are one thing, but this wasted a massive chunk of our time, energy and emotion. Putting faith in the process in the future would be hard – if a deal can fall through this late, when we weren’t even pitching but got pitched… Well, I just don’t know. Everything about this feels wrong.”

Fishkin’s piece includes emails between him and the venture capitalist (names are redacted), as well as the slide decks that he used to woo investors. (There are also wonderful nuggets about raising money like when his wife baked some cookie bars for the partners at Ignition, a previous investor in SEOMoz which supported the current funding efforts).

An investor email indicated that things were not going well

As I’ve written in the past, Fishkin brings a new definition to the word transparency. He’s been writing about the startup and venture capital process in great detail for many months on his blog, but I am sure that even he didn’t expect things to turn out this way.

Fishkin floats several reasons why the deal blew up including a slight downturn in revenue for June/July; the erratic public markets; and an ill-timed VentureBeat story from earlier this month. (We set the record straight on the information floated in the piece in this GeekWire story: SEOMoz considers $20M to $30M VC round, but Rand Fishkin says no ‘done deal’ yet)

After all is said and done, Fishkin writes that he’s actually pretty happy that the deal didn’t come together.

“The best part about this otherwise frustrating result is that we didn’t end up signing a deal with a firm who didn’t truly believe in us, our market or our future. Despite our positive experiences with Neil from March – July, the last couple weeks clearly showed that he would have been a poor choice for our board of directors. Whatever caused the cold feet, it’s better now than after the investment, when a wrong choice could have made life unpleasant for everyone for many years to come.”

In a follow-up, I asked Fishkin if he’d ever consider taking venture capital after this experience.

“Honestly, right now I feel very jaded about VC,” Fishkin tells GeekWire. ” But, that said, I recognize that making a statement like ‘I’ll never raise money again!’ could be overkill. I got dumped once in college, swore I’d never date, then met my wife. So…”

In the comments of the post, Fishkin receives support and accolades for sharing his story. But most folks agree that the particulars of the situation just “suck.” That said, Fishkin tells me that he’s glad that he wrote it.

“Definitely a lot of catharsis happening here,” he says. “In fact, honestly, finishing the post yesterday was the first time I felt good about the experience since things started to go sideways.”

John Cook is co-founder of GeekWire. Follow on Twitter: @geekwirenews and Facebook.

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