Transparency is a core value for Rand Fishkin and Moz, the Seattle marketing software company he founded 12 years ago. While it has guided Moz along its startup journey, staying true to that value also caused some bumps in the road.
Speaking on a panel Thursday in Seattle at an event hosted by Techstars and Silicon Valley Bank at Moz’s downtown headquarters, Fishkin retold a story of how writing a public blog post about losing an investor turned into a positive outcome for his company.
In early 2011, a New York investor first approached Fishkin with a $24 million offer to invest in Moz. Fishkin weighed different offers, but eventually agreed to the original deal with a term sheet, often considered a point of no return in fundraising because the startup has to break the news to other suitors.
Two weeks later, Fishkin said the VC pulled out of the deal.
“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,” Fishkin wrote in a 5,600-word blog post detailing the debacle.
As GeekWire’s John Cook noted at the time, the blog post was virtually unprecedented behavior in the fundraising world — and it came with consequences.
“That blog post pissed off almost all of the other investors that we had talked to in that process, more so than expected,” Fishkin said Thursday.
The event, called “Culture. Why it’s Absolutely Good for Business,” brought Fishkin, LiquidPlanner CEO Liz Pearce, and Swift HR Solutions Founder Shannon Swift together to discuss the importance of company values. Angel investor Heather Redman moderated.
Both Pearce and Swift stressed the importance of leadership in defining company culture.
“It really does need to start at the top,” said Swift. “Trying to manage culture from the middle is pretty ineffective.”
When Fishkin published his blog post, he felt like was leading by example. He brought it up at the event Thursday to demonstrate the importance of upholding your company’s values, even if it makes you unpopular.
“We are transparent even to a fault, so I did write about this experience,” he said.
But not every investor was turned off by that polarizing blog post. It resonated with Brad Feld, managing director of the Boulder, Colo. venture capital firm Foundry Group.
“For whatever reason, he became my friend the minute he read that,” Fishkin said. “He was like, ‘this is a person with whom I am aligned. I like this company’s values.'”
Feld flew Fishkin out to Boulder on a Friday; two days later, they set their terms. Feld joined the board and Foundry participated in an $18 million round in 2012.
In January of this year, Foundry Group invested an additional $10 million in Moz, bringing the company’s valuation to $120 million.
“He turned into a wonderful investor,” said Fishkin. “In the short term, values caused problems and challenges — long term, it worked out.”
Editor’s note: Moz is a GeekWire annual sponsor.
