When Rand Fishkin left Moz in 2018, the marketing world was waiting to see what was going to be his next move.
The reality was, he already had it figured out. A new startup in the shape of SparkToro.
In this episode, I talk with him about where the idea for SparkToro came from and how he left his secure and well-paid job to successfully launch a new tool with no capital, no paying customers, and during a global pandemic!
Louis: Bonjour, bonjour, and welcome to another episode of everyonehatesmarketers.com, the no fluff actionable marketing podcast for marketers, marketing consultants, founders and tech people who are just sick of shady, aggressive marketing. I'm your host, Louis Grenier.
In today's episode you'll learn how Rand Fishkin uncovered a need for a product that didn't exist, how he validated the need for it and how he built momentum for it. So my guest today probably will just be found in Moz, the SEO software. He's now the co-founder of SparkToro which is an audience intelligence tool. Also the author of Lost and Founder which is a really, really interesting book on startup and entrepreneurship. So, Rand, good to have you back on the show.
Rand: Bonjour. Louis, great to be here.
Louis: There are really two ways we could have started the podcast. There was one way where we could have gotten into how to use SparkToro and why it's so nice, and case studies and what not. There is this way where we'd promote the fuck out of the tool, which would be nice for you, but I don't think my podcast would be that interesting because you can't really see the tool, and whatever. So I thought about, okay, let's be very selfish here. Let's think of another way that would actually be interesting to me and to the listeners of which would be more around behind the scenes, but not so much about Rand Fishkin with a huge, huge following and huge clout and influence.
But more about the Rand Fishkin who actually had to find an idea of how to develop it, how to find something that people found actually interesting, which I think is the thing that with your experience you were able to do but you didn't really use your audience or your influence for that, you used your intelligence, should I say for this particular part. Let's dive into that right now. I have used SparkToro in the past, a very nice way to understand what people to reach out to based on your goals and to understand what podcast you can reach out to based on your interests or the interests of your audience and whatnot. And when I saw the tool for the first time I was like, "Shit, that didn't exist before. That's weird."
Louis: It's such a useful tool. Like that. Anyway, tell us, and please tell me, how did you come up with this idea in the first place? What was the very, very first time you potentially started to think of? "Hmm, that's interesting."
Rand: I have the same frustration, the same problem that SparkToro solves. And that was the inspiration for it. Back when I was at Moz, obviously Moz's SEO software. I'd help a lot of people with SEO, but I also would help a lot of startups and early stage companies and just companies of all kinds, as I'm sure you do with just marketing. How do I get my message in front of the right people? And if it wasn't in the SEO toolbox, it was really hard for me to help them. So if you had a product or a service and there weren't people searching for exactly what you did trying to help them was very, very difficult.
I was actually on the board of a company. This is where the SparkToro idea, the catalyst for it, came from. I was on the board of a company called Haiku Deck here in Seattle. And their constant challenge was just finding any marketing channel that would work. If they ever found one, if they found a way to get in front of the professional coaches and real estate professionals and life coaches and some religious users, teachers that use their product, it was a simple version of PowerPoint, they did great.
But the problem was finding those, whatever it was, sources of influence. A conference, an event, a podcast, a website, social account that would actually reach their audience. I remember talking to Adam, the CEO and saying, "Gosh, yeah, I feel like what we really want to do is cyber stock at scale. Just steal a bunch of your customer's phones, log into all their phones and look at all their accounts and see what do they follow? What do they share? What are they linked to? What are they reading? What do they subscribe to?" And that's where the idea for SparkToro came. I realized with Casey, "Oh, wait a minute. A lot of this data is public on the web and you can crawl it. It's a pain in the ass, but you can get it." And that's where the idea came from.
Louis: What's interesting here is that you've avoided so far anyway to say the I word, the influencer words. You haven't mentioned it once. You said... So why is that? And then we'll come back to the story because there is more into that.
Rand: Yeah. It's not that classic influencer marketer, now what's called influencer marketing isn't effective. It is a marketing channel for some primarily consumer product companies, but it's not something I'm passionate about or particularly interested in. When I think of sources of influence I think of all the sources of influence. A podcast, a YouTube channel, a website, a publication, an event, a social account that is not on Instagram. An influencer marketing means, pay half naked people $500 to pose with your product on mostly Instagram and now a little bit Twitch and YouTube. And that's not something that we really wanted to help with.
So actually SparkToro is very anti-Instagram leaning in its initial version intentionally so because we did not want to be associated with influencer marketing tools and because we're very... frankly if that's what you want, we cannot help you.
Louis: That's funny because we never really talked about it together, but from the positioning of the tool and from the way you just explained it in the last few minutes, I could sense that, that was the point of view you had. If I may, as a small suggestion maybe is to actually go for that as a stronger even positioning and copy. That might alienate some people, but that might also make some people say, "Shit, this is exactly what I think as well." Because that's what I think. So just a small suggestion. That's for free. It's just-
Rand: Just have a, "We are not this," big red circle with an X through it.
Louis: We're not half naked. But it's not about finding half naked woman. It's about finding-
Rand: And men. Men are also doing quite well with the half nakedness on Instagram these days. Not me. I am not doing well with that.
Louis: Let's see. All right. So going back to the story. You were part of the board of this startup and they had this problem, and it kept coming up and coming up. Surely that wasn't good enough validation for you to start thinking, "I'm going to leave Moz and start the startup." And by the way was that the thinking? Was it, "I'm going to try to find a product so I can launch something else before I decide to leave Moz?" Or was it more, "I'm going to leave Moz and then I'm going to find something else."
Rand: I knew that my... It's a hard thing to describe. I described it in a blog post as zero is security escorts you out of the building and 10 is hugs and handshakes and everybody's great friends. And I was a four in my departure. So a little bit difficult to describe, but I knew that I would be leaving Moz partially of my own accord, partially not. And I wanted to have something to do right away. Louis, I knew for example, that the day I left Moz a lot of people would pay attention.They'd be like, "Oh, Rand's no longer at Moz." Because I've been there 17 years. There's a lot of association built up. And I wanted to capture and channel that attention. I didn't want it to be a negative thing. I wanted it to be a positive thing. So instead, "Oh, poor Rand, I wonder what he's up to next and maybe I'll reach out to him for a job or whatever."
I wanted it to be, "Let's take that attention and channel it into the next thing that I'm doing." So I wanted to have that next thing already set up. I spent a lot of time talking to marketers and agencies and founders and a lot of startup founders and realized that this problem is near universal. And it was getting worse and worse because more and more people were interested in, how do I do marketing without just throwing dollars at Facebook and Google? And at the same time I've been writing about these trends a lot, Facebook and Google across all their platforms have made organic content less and less visible.
So you have this frustrating world where the platforms have used their monopolies to dominate attention and to force businesses who want to get in front of people's eyeballs to pay the money. Facebook's a perfect example of this. Facebook's average engagement rate or average visibility per post was, you remember five, six years ago, it was 4%, 3%, today it's 0.09%. One in 1000 people will barely see a post that you put on the average company, Facebook page. It's just awful. People need other ways of getting at this data. Ways to end around that duopoly. And that's what inspired me to go after this. The weird thing is, Louis, Casey and I didn't know if it would work.
Rand: We did not know whether, if you crawl all this data and then you put it together, will you be able to get enough quality profiles and will the data that the overlap shows, will that be good enough, will it be interesting, will it be useful? It wasn't until probably January of 2019 when we had a tiny alpha version. And we were like, "Oh my God, it works kind of."
Louis: So let's think back of the timeline, and I don't want to put you in trouble with your past employer and all of that. So there might be [inaudible 00:11:05] share, but surely you started talking to people about that problem before you left Moz, right?
Rand: Yeah, yeah, absolutely. And I had a conversation with the CEO at Moz. [crosstalk 00:11:20]. She knew, "Okay." Because once we had the conversation about when do we want to have you leave, then it became a...
Louis: If you had to explain to someone listening right now, how you actually conducted those, I wouldn't call them the study interviews. It's up to you to describe them the way you want to, our conversations. What would you tell them? And again, this is why it's interesting because whether you're Rand Fishkin or someone who doesn't have a single follower those principles apply. So how did you approach that to discover whether there was a problem or whether there was just one company that said, "Actually we struggled with that problem."
Rand: Louis, my strong recommendation to anyone else is actually to follow this model. And I'm glad to say that I actually followed my own advice in this case, which was essentially, build up some expertise around an area. I've been doing web marketing obviously for a long time. I started doing more and more brand marketing, outreach marketing, creative forms of marketing that were not just SEO, especially my last few years at the company, at Moz. And then took that expertise to build my network around this field. Talk to lots of marketers who did market research and outreach and brand marketing and social media marketing and content marketing and then use that network to conduct mostly informal, but a lot of interviews.
So literally sitting down with people at conferences and events, going to their agency offices and talking to them and their teams about how they did this work, getting on the phone with people, getting on video calls, lots of emails back and forth, sometimes just informal Twitter, DMs, and LinkedIn DMs. But it was just a lot of like, "Hey, how are you doing this? I'm thinking about this problem." And from that I built an actual survey. So from the interviews, the one on one interviews, I took all that, put together a survey, which we ran in, I think it was the start of 2018. Just before I left Moz.
Ran that survey to maybe seven or 800 folks in the marketing world. Maybe even more than that. Might've been a thousand and essentially asked them how they solved this problem. When you need to find what your customers pay attention to and where you can reach your audience that isn't just throwing money at Google and Facebook how do you go about doing that? And how big of a problem is that for you and what do you do it for? And that survey data came back looking really good. Looking like this was a serious problem that many marketers had, that they spent a ton of time or money on. And that's what excited us about the problem. And so then when I launched the company the next few months were assembling more data, doing more of those interviews. And then that's how we did our fundraising which closed in June.
Louis: Okay. So let's go back to the first step where... I think to follow your recipe, some people would say, "Oh yeah, Rand has been at it for almost 20 years. He has a huge network. It's easy to reach out to people." But I guess that's part of the recipe. You've worked your ass off for years and years and years to build a really, really, really big following. So I would say step zero of these recipes you're going to have to have an audience who trust you somehow, even if it's a small one so that you can reach out to them for those type of interviews. If you don't-
Rand: And I didn't use my SEO network. Obviously there's some crossover, I have a noncompete with Moz so I couldn't build SEO software, I had to build something else.
Louis: Yeah. No, that's a good point as well. And you just laterally reached people. And at this stage you already had an idea of the problem you were talking about. So instead of asking questions such as, what are the biggest problems you suffer in your job or whatever? You boiled down already to this problem. What do you think of this problem? Or how do you solve it? Show me how you do it right now. Because from user research I know that sometimes folks would start with even the study four, which is tell us the biggest problem you suffer from and then we'll build something on top of that. But you already had the problem.
Rand: Yeah. And part of that is personal interest. I had a problem that I had struggled to solve and I was interested in, and then I just wanted to validate essentially whether lots of other people have this problem and whether enough people have this problem, and it's painful enough that people are willing to pay to solve it, assuming we could build a good solution.
Louis: So what were, would you say the top three questions that were so helpful to you when you talk to people and then when you need to solve it? You mentioned a few, but I'm just interested in specific questions that you were the most [inaudible 00:16:23].
Rand: The biggest one was definitely how often do you have this problem and how do you solve it today? And then what do you do once you have it solved? How do you take that data and turn it into actionable things that you do with your marketing in your business? And from those three, we were basically able to intuit that the solving the data side was more important in the short term than solving the, take the data and go tactically run with it. There were enough people who had just the problem of, how do I get this information? And then the diversity of answers on the, what do I do with this data was so broad that we felt like, "Okay, software is not the right solution to... Okay. Now, I have a list of podcasts and websites and social accounts to go after, what do I do with it next?"
Those answers were so broad that we were like, "Nope, that's not what we're going to solve. We're going to solve the, take this problem from..." A lot of companies we talked to, bigger companies we talked to, bigger agencies, they were paying 25, 50, $100,000 to run large scale audience surveys of thousands of people to try and get at this type of answer, which is ludicrous. Just crazy. Because self reported data is crap anyway. If I ask you, "Hey, tell me 500 people you follow on social." What are you going to do? "Oh, okay, here you go."
Louis: Well, that's the typical example of yeah, don't ask people what they think or what they can remember and see how they actually behave, which is what SparkToro does, which is following what people actually do, the accounts they follow, what they are talking about. It's very easy in surveys to make you feel good and makes you feel smart and say, "Oh, I read Econsultancy reports every month." When in fact you're actually on Instagram looking at half naked women or men or whatever, right?
Rand: Yeah. Yeah. And obviously what we want to try and do is not look at... And this was part of the complexity of the software itself, not looking at accounts that are broadly popular. So for example on Twitter and on Facebook almost everyone follows some big political accounts in the US. Barack Obama, Donald Trump. So what? Not useful. What you have to do is instead say, "Oh, people who describe themselves, who's job title includes interior designer, what do they uniquely follow that other people don't?" So we take the, here's what everyone follows, subtract that out of what interior designers follow and now we can see what interior designers follow that's unique to that group.
Louis: So those questions, how do you solve the problem right now? Walk us through it. That sounds like a very important question for you. And it sounds like you've got the perfect answer, which is, we suffer from this problem quite badly. We pay a shit ton of money to solve it. And the solution that we're paying for is inadequate, very labor intensive, inaccurate, right?
Rand: Yeah. For a lot of people, I will say the two frustrating answers that we got back that led us to feel like this was going to be a challenge was one, a lot of people did not even try to solve the problem. So a lot of people told us, "I have this problem, I just ignore it. I just don't do that work because I don't know how to go about solving it." So we were like, "Okay, this is going to be a huge education hurdle. We're going to have to teach people how to solve the problem. We're going to have to inform them that they have the problem." And then the second frustrating one, which is just a linguistics problem, at least in English, people said, "I have this problem, but I have no word or phrase to describe it." No one said, "Oh, yes, you're talking about sources of influence discovery." They don't have a word for it.
Seven years ago, 10 years ago, pre Instagram, people would've called it influencer marketing. But then influencer marketing came to mean the half naked people on Instagram thing and so now this problem doesn't have a word or phrase. So we've been using audience intelligence, but that's our own creation.
Louis: And how far along in a timeline did you actually decide on this name?
Rand: I would say that was pretty darn early on. It was basically, let's choose a name for this where people say, "Audience intelligence, that sounds like something I should need and I want to learn about, but I don't know what it is."
Louis: And so you send this survey out to 800 people that failed to confirm the fact that there were those two types of people as you mentioned, like the problem that they were trying to solve already or the problem that they had but they didn't even try to solve. So then what happened? What did you do? You had to take the leap, right?
Louis: Was it the time you left Moz?
Rand: Yeah. Then it was, "Okay. We like this problem. We think there's some opportunity here." I leave Moz and I start the SparkToro site, basically. I gave myself almost 12 hours off and started SparkToro the day after I left Moz. So the first blog post, the blog post that I sent out to everyone in my network was my last day at Moz, my first day at SparkToro. And that attracted a lot of attention, which was great and then got people knowing, "Okay, Rand's not at Moz anymore. And he's got this new company." And then the next three months were essentially pitching investors. I wanted to make some progress raising some money before Casey left his job.
He was still working at [inaudible 00:22:39] at the time. That's my co-founder. And Casey is the technical guy. He did all the software building. Huge, huge amount of reliance on him. I was very lucky in that I still had my severance pay from Moz. I had a nice severance pay. Basically, I got a year of severance, which is very generous. But a lot of people think, "Oh, well, Moz is like a 55, $60 million year company and Rand owns 20% of it so he must be rich." Sorry. Until, or unless Moz sells, my net worth is very, very small. Don't believe what... If you start Googling Rand Fishkin, the first thing that comes up is net worth.
Louis: Yes, [inaudible 00:23:25].
Rand: And all of those sites are wrong. They're just terribly wrong.
Louis: You talked about it in your book, didn't you? I think you mentioned your salary. You give an idea of, it's not what you think. So thanks for being transparent with us and with me on this. I think that's why people follow you and like you so much. So you left Moz and literally the day after you piggybacked in a sense off this big news, because you knew that people would follow that. And you had at this stage a rough landing page, if I'm remembering-
Rand: That's right.
Louis: Rough websites [crosstalk 00:24:04]. There you go. [crosstalk 00:24:07]. Why did you feel like that was the right next step for you? Sorry, I'm asking a lot of questions, but I'm curious about it. So let me just try to recap a bit. So you left Moz, and you said, "I reached out to my network about this blog post I just wrote." How did you reach out? Do you have a newsletter or did you literally reach out one by one to your people?
Rand: I cheated a little bit. I took all my contacts. I had about eight or 9,000 and I used G-mail's 500 per day BCC to over the next four or five days send it out to all my contacts.
Louis: So you did it really old school. You didn't use-
Rand: Really old school.
Louis: Mail merge or... Okay. Obviously, when we say those 8,000, 9,000 people, does that, I would say your people, right? People who you've met or you have a strong relationship with or? Your answer feels like not so much. No? Not all of them.
Rand: I would say probably somewhere between 1,000 and 2,000 of them I have some relationship with. Some in-person relationship with. We've met at a conference or event or we chatted online or that kind of thing. And then probably another, the other five, 6,000, whatever, that group is more... They've emailed me about some problem they've had in the marketing world. We've had some contact, but it's probably primarily digital. Maybe they reach out about some blog post I wrote over the last 15 years or whatnot. There were a lot of bounces in there. So I was able to call that list down to... I sent 'em all in six days. So it must have called down to only 3000-ish emails. Basically once I exported the contacts, merged them throughout the ones that didn't... No longer resolved.
Louis: It's funny. Because I would have thought you had way, way more based on all the work you've been doing and whatever, but 3000 emails-
Rand: Well, sure. What I could rely on was... Those contacts were the closest most well connected folks. And so by emailing them it worked out great. And then even just sending a tweet, putting up a post on LinkedIn and putting up a post on Facebook it reached thousands more people. I think the blog post had something close to 70,000 visits in the first week. So a lot of people knew about it. Not a lot in terms of... I'm not an influencer on Instagram who has 1,000,000 followers who know about every swimsuit I put on, but in the marketing world, good enough.
Louis: Okay. But that feels... I suspect that for people listening to you right now, it doesn't feel like this is a crazy number that they'll never be able to do and that they have to put 20 years to actually build a massive list, It's actually quite humbling to hear you say that. I remember vividly it's like, I'm not going to say it, but you know those world events where you remember where you were, I'm not going to say I remember where I was when Rand Fishkin left, that is what I want to say. But I do remember when I read the blog post because a lot of my colleagues sent it to me and said "oh shit, did you see this?" and I do remember this blog post. So what happened to these... You said 70,000 visits in the first week, and you start collecting a lot of emails then. So what happened next? What did you do next? What was your next step?
Rand: Yeah. So as we were raising money, we were also building this email list and over the next, essentially 18 months, I did one thing and Casey did another. So 90% of Casey's day was essentially building the product, validating that the technology could work, figuring out how to crawl all these social networks and websites and connect up the profiles. Meanwhile, I was essentially on the road and on the blog trying to build up an audience for SparkToro. My goal was ,let's get marketers and people who would be interested in solving this problem over to SparkToro. And one of the ways that I did that was very, I almost want to say roundabout. A lot of the big content pieces that I put out and research that I did was about the problem of Google and Facebook's duopoly in the advertising and marketing world and how they were infringing on the ability of marketers to reach their audiences.
Rand: And so the biggest blog post, I think that I wrote was, half of Google searches now don't result in a click. That made its way hugely around, not just the web marketing world, but all sorts of different worlds that got cited by Congress and when Google was testifying before Congress, it got a bunch of news stories around it. So those kinds of things where I'm essentially doing research and publishing research that is helping people understand that this problem exists and that they have to start thinking of other ways to reach their audiences, that was really my goal. It is self serving but in a way that is also, I hope very helpful to marketers, like legitimately helpful, even if you never have anything to do with our product.
So over the course of those 18 months we attracted about 20,000 people who signed up for our email list. And then when we got to the beta period, I essentially went through... so of those 20,000, I think about 4,000 filled out an additional survey. So once you signed up for the email and we confirmed it we then sent you a survey that said like, "Hey, take this if you want to jump the line." And the survey was probably a 10 minute survey or so. Asked a bunch of questions about your job and role. And I went through that list manually for our beta and looked for a diverse group of people who matched, some people who were agencies, some who were independent consultants, some who were in house brand managers and marketers, some who were founders.
And then we took those four groups, emailed them and said, "Hey, do you want to be part of the beta? Here's your invitation to the beta." And we did three-ish groups of about 300, 400 people each in the fall of last year. And then those folks helped us test the tool and get us to the launch this spring.
Louis: So there's a lot to unpack here. The first thing is you've picked an enemy very early on.
Rand: Yes, exactly. An enemy. I can't recommend enough that startups have an enemy. It could even be an old way of doing things. It doesn't have to be a human being or an organization, but just an enemy.
Louis: Yeah. I can see how fired up you are about this. This is what happens. Passion arises. Not talking about the US politics too much. This is what happens when you pick your fucking enemy, right?
Louis: So you've done that very consciously, sorry, in a sense and then you reverted as well to what you do best, which is this long form content, very thoughtful, very research based data for 18 months. 18 months. And what strikes me the most about your approach all the way to the actual manual, very organic email you sent me a few weeks ago when I actually purchased SparkToro as part of my job is that you've been doing things very organically, very naturally. Those BCC, those looking through your beta list manually. Everything seems very organic. I'd like to take a minute here to think about that. And if you are listening to this podcast [inaudible 00:32:36] right now, to think about that and compare that to the approach that a lot of people are taking right now about scraping the shit about LinkedIn and also emailing you with fucking lead generation funnels and spamming the shit out of you.
There is another way. And I'm picking an enemy here voluntarily. I am fighting against those growth hackers who have no consideration for the people in their list or the people they are reaching out to. Compare that to what you've done and I think it's admirable to see that you keep these philosophy, and is very effective clearly. That was a small [inaudible 00:33:12]. But I want to go back to something you said, because I'm pretty sure some people would find it very interesting. You said you raised capital for this, right?
Louis: You raised capital with zero paying customers, correct
Rand: That's right. Yeah. Very much a seed round. Speculative.
Louis: How did you do it? What was the approach? You use all the surveys you had sent to build the deck and to reach out to your connections? How did you approach it?
Rand: Yeah. So this is one of the things that we've been very transparent about. If you search for SparkToro funding, you'll find our funding documents, you can find the Google doc that I essentially used to pitch and raise money. But the process was like you pointed out, very organic and very simple. I essentially reached out to people from my network, many of whom, in fact, I think half of our investors had not invested in a company before. They were not investors. They were just people in our network who basically, a lot of agency owners, content marketing agencies and marketing agencies, branding agencies, those types of folks, people who I had met through the SEO software entrepreneurship world, people I had met through the Seattle tech scene.
I think about 25% of our investors are local to the Seattle area. And it was 30, 36 angel investors. And we essentially said, "Hey, we're going to raise money in this unique way. It's an LLC where we distribute profits, et cetera, et cetera." And I emailed folks and basically said, "Hey, you might not know, but I left Moz, I'm doing this new thing. I'm going to raise money for it. Well, we're going to use this unique structure. Would you be interested in chatting? Is that something you want to chat about?" And I will tell you, Louis, I felt so nervous and-
Louis: I can imagine. Yeah. [crosstalk 00:35:18] asking for money. I understand that. I understand that.
Rand: I don't know. I've talked to a lot of entrepreneurs who... They're very shameless. I wish I had that quality. I don't have that quality. There were a few people who I didn't email because I felt too embarrassed. And I'm thinking of one in particular who was really pissed at me afterward. He's like, "Why didn't you email me? I wanted to invest." So [crosstalk 00:35:51].
Louis: Okay. I would have sold my house and everything. I'm only joking obviously. I don't have a house. So what was the answer then? Because I can see that you're preparing those emails and before pressing send you felt weird about it, it's very odd to ask for money like that and whatever. What was the answer? What happened?
Rand: We had a very high success rate. I think I tried to estimate it. It was somewhere between 75% and 80% of the people I reached out to said yes. So part of that is because I have good targeting. So I knew, "Hey, here's a good example of Ian Lurie." A personal friend, someone who I've admired and looked up to for a long time. He had been in the web marketing field. And he sold his agency, I think the year before we raised money for SparkToro. So I was like, "Okay, Ian, good bet here. I'm going to reach out to him." Lisa Myers. She sold her agency to Omnicom. It's like, "Great. I'm going to reach out to her." I had some friends who had sold Urbanspoon a few years before and I had helped them with SEO early on.
I was like, those guys, they're great. I played Dungeons and Dragons with them. So I was like, "Okay, they're going to invest. Because they owe me." I had people in my network who basically I had... The founders or sorry, the CEOs of Zillow and Redfin, which are both Seattle-based companies, they both invested despite being competitors, which is awesome. So that was really great. We had a few people in our network through the SEO world that came in. It was a good process. There were even a few people who had reached out to me after I wrote that blog post, which I didn't know this was going to happen, but I hoped it, where people reached out and said, "Hey, what are you going to do next? I'd really love to be involved."
Rand: And so that works out. I think one of the challenges is the advice for a lot of early entrepreneurs and folks who are new to the field is unfortunately, spend time building your expertise in your network and this process becomes way easier. And that is not nearly as compelling a tactical bit of advice as wait, what's the secret to getting in front of investors? The secret is-
Louis: The secret is to scrape LinkedIn for everyone who has invested in the job title and reach out to them seven days straight. But again, I think this is important to remember. And you have this mindset and you have this philosophy. Naturally, you've been doing that for so long that it's just embedded in your DNA almost, but it needs to be repeated out loud. This approach really goes against what a lot of people and marketers and others are doing right now, which I truly believe is the wrong approach. It is a short term tactic. Like building a brand, like building relationships, it just takes time. And exactly, as you said, the success rate of your seed round is like 75, 80%. That's because you have a brand and a trust attached to you because you've been giving and giving and giving to your audience for so long that it's just naturally that they choose to give back.
People who expect to take, take, take before giving anything away. This is what happens. You will never really get anywhere close to 75% or 80%. You'll probably never get anywhere close above eight, a zero percent at this stage. But I think this is the, in French they say, Le fil est rouge. I don't remember the English fucking... [crosstalk 00:39:58].
Rand: Which is the red-
Louis: The thread. This is the thread of this conversation, and this is the thread of your work, which I admire for that. So going back to the timeline, you raise the seed round, and by the way do you have, actually I didn't ask you this. Are you just the two of you still working on SparkToro full time?
Rand: Yeah, that's right. We knew we wanted to give ourselves a lot of runway and we wanted to have a very, very low cost structure because we didn't know whether this was going to be... Are we going to come out of the gate and struggle to get to 5,000 MRR and then 10 and then 15, or we're going to come out of the gate and it's going to be 20K in month one. Who knows. And so because we didn't know, we wanted to be very cautious around that. I didn't take a salary the first year because I had my Moz salary. And then Casey left his job after we got funding or maybe right about when we got funding. And then we kept it just the two of us.
We used some consultants and contractors on UX, UI, some SAS consultants to help us, a company called Elevate which helped us with analyzing all of our feedback data from the beta and determining when to launch and what other things we needed to do before we were ready for that launch. That's actually what predicated us or what inspired us to do the redesign over December. And I think that worked out really, really well. We leaned on other people, but we did not do full time hiring. And as a result, Casey and I were looking at it, we're like, "Okay, we are I guess two months in basically and we are more than halfway to profitability with our existing, relatively small customer base, 150-ish customers."
Louis: So we are recording this at the end of May, 2020. Can you share the... If you're not comfortable with it, that's cool. But what's your rough MRR right now?
Rand: We use this tool called ProfitWell, which is very great. And I like it a lot. Highly recommended. MRR overview says we are at 21,239.
Louis: Pretty nice.
Rand: Yeah, feels pretty good-
Louis: For mostly recurring revenue, which is revenue, obviously not profit. And you say you are halfway through profitability, meaning that you will be profitable once you have 40,000 MRR.
Rand: That's exactly right. Yeah.
Louis: And 150 customers. So that's like, I'm not going to do the math properly versus what? What's the average-
Rand: Oh, sorry. Oh, average revenue per user?
Louis: Yeah. Average revenue per-
Rand: It's right around 150, 170.
Louis: 150. Nice. So yeah. Very, very strong numbers. And if you keep growing at that rate you should reach profitability with a two person team, the seed rounds and, what? 17 years of work in the back of that. That's pretty nice. Are you happy? Are you grateful? Do you feel [crosstalk 00:43:28] are you not embarrassed anymore?
Rand: I think I'm extremely grateful for so many people's support through this process and grateful that we built the business the way we did. I think the one thing that is very frustrating obviously is our launch timing just sucks, man. I'll tell you, Louis, I have these early access emails. So at the end of February we start sending our early access emails to the 20,000 people who signed up and we're basically going through that list. Every week or two we're sending two, 3000 of those. And as the pandemic is getting worse and the economic situation in the United States and in Europe and all these places just falling off a cliff, more and more of the emails that I send are coming back with so-and-so no longer works here.
So I'm just seeing this carnage in the marketing world, just destruction of so many jobs coming back to my inbox every time we're sending those emails. That's heartbreaking, just heartbreaking. And then of course, we're talking to a lot of people who had been early customers or beta customers or whatever, and they're like, "Yeah, I wish I could sign up but finance pulled my credit card. I'm not allowed to do any new spending until 2021." We're cutting all of our costs. Our customers are gone. Brutal, just brutal. The US economic picture is down 25, 30%, just GDP evaporated and the outlook for the next six months is pretty brutal. And it could be much longer than that. I think most economists are looking at 24, 36 months recovery minimum.
So we're lucky in that we're doing well despite that. We're able to find customers. But our customers, if you look at our customers, they're the people who are doing okay through the pandemic, the people who are still growing. We've actually had a surprising number of consumer products on the toys and games and entertainment side which makes sense because there's a lot of demand for that. Had folks on food and grocery recipes, that kind of stuff. It makes total sense. We've had almost no one from travel and hospitality. We've had a lot of people from healthcare and medicine. So you get the sense of aha, these are the few industries that still have growth and opportunity and so of course there's folks looking for them.
If it was six months ago SparkToro would probably be much more popular. And you can see that in the data. The end of February signup rate to paid was 5%. It's now about 0.5%. Nothing changed, it's just the economic situation changed.
Louis: Yeah. I'm glad you're sharing this as well in total transparency as always, because you've really launched that. I don't think you could launch at a worst time. But I guess that's what it takes. I guess this is the reality of it. You've built, I'm going to forget the word again. I'm very good today. But you've built this strength, to really say, like mental strengths over the years to be able to protect yourself mentally at least against that. And I guess you sharing these stories as a way to do that. I'm sure that people listening to these podcasts will reach out, will check out your tool and some of them hopefully will start paying you as well, so you can become profitable.
And of course, we're out of time. We have one minute left. I wanted to thank you again for this candid conversation and sharing all of that. My personal hope is that people will understand that there is another way than just doing it the automated way and expecting that in two weeks time you'll have built an audience and trust to get the results you got. And the last thing I wanted to say is that it's actually the first interview I've done post shit COVID is happening. So I've stopped doing it for two months because I just literally couldn't. And every topic I was getting from potential guests was how to do marketing in a crisis, how to do marketing in a crisis. And I didn't want to cover that. Not because I didn't want to help people, but I felt it was just too much. And instead I spent time talking to marketers one on one and trying to help them out, which I thought was a much better use of my time.
Rand: I love that.
Louis: But anyway, Rand, thanks so much for your time. Sparktoro.com is the place to go to read your posts and check out the tool. You have 10 free searches for any accounts. I've personally found a lot of value out of it already. So thank you.
Rand: I'm thrilled to hear it. Louis, thank you so much for having me.
Louis: You're very welcome.