The Bright Ideas eCommerce Business Podcast | Proven Entrepreneur Success Stories
BI 322: Learn How To Raise $1.3M In Creative Startup Funding Using the SparkToro Funding Method
July 14, 2020
3 months, 50 emails, 36 investors, 1.3 million bucks. It is no secret that SaaS debt funding is a tough nut to crack, but Rand Fishkin just proved otherwise in such a short amount of time.

After 17 years as co-founder and CEO of Moz, Rand Fishkin continues to bring his brilliance to this world through his new venture, SparkToro. For this project, he hustled his way through SaaS debt funding without taking on the traditional venture path. He has just proven that a funding structure can be more sustainable and profitable for long-term business, aiming more to be a zebra than a unicorn.

In this episode, Rand shares how he conquered SaaS debt funding for SparkToro. Through this, he wants to promote a healthy economy where small to medium businesses can thrive. It may not follow the common venture path, but it does not mean it is less ideal and profitable. His funding method could just be the brightest new idea for aspiring startup founders who are still finding their groove.

Tune in to this episode to learn more about SaaS debt funding, the Rand Fishkin way.
Episode Highlights

[00:23] — Rand introduces SparkToro and gives a brief background about himself 

● Rand started a new SaaS company called SparkToro that helps with audience intelligence and market research. 
● He co-founded a company with his mom called Moz. He worked there for 17 years before putting up SparkToro with his long-time friend Casey Henry. 

[03:28] — How Rand views SaaS debt funding 

● The SparkToro funding method does not follow the usual path to venture funding.
● He wants to raise funds without the expectation of becoming a unicorn startup and without giving full control to investors.
● He thinks the venture model is unhealthy and detrimental to the survival of many small and medium businesses.

[10:19] — Tips before looking for SaaS debt funding 

● Build your expertise. 
● Help a lot of people and build your network through that.
● Once you’ve established a good network, start your SaaS debt funding.
● Prepare a pitch deck with the necessary information.

[16:41] — Rand shares how they determined valuation

● Before SaaS debt funding, they set a structured valuation and picked a number that is standard for a company at its early stage.
● They had conversations with their lead investors to determine a comfortable price range for both parties.

[24:22] — Rand explains the LLC as his chosen business structure. 

● As an LLC, the investors own units of distribution, not units of ownership.
● This gives founders more control over decision-making in the company’s operations and growth.
● The management team can choose whether to distribute profits or reinvest those profits. 
● They get a fixed salary until they pay back their SaaS debt funding. 

[29:43] — How did Rand make sure his investors are accredited?

● He mentioned in his email request that he could only take money from accredited investors. 
● He also sent a link to the US rules for accredited investors.

[30:47] — Rand shares some takeaways on SaaS debt funding

● Think really hard about what you want to build in the long term.
● There are intense hours and relaxed hours as a startup founder.
● You can achieve what everyone would consider a financial success and not have a successful outcome.
● Think small and sustainable.
● Only a few founders realize how unlikely exits are.

[36:25] — How did you build the business after fundraising? 

● There was no real prototype, but they had a proof of concept and some information that could produce some results.
● The first year of development involved a lot of market research through a medium-scale survey and face-to-face interviews.

[42:01] — How the pandemic has affected SparkToro’s survival and growth

● They had to come up with new strategies to make up for the setbacks brought by the pandemic.
● They saw fewer subscriptions, and the bounce rate was high.
● However, they continue to find new ways to thrive.

[44:51] — What are your business strategies during this pandemic?   

● Make the free account more generous and promote it more.
● Build future demand to have a more successful business in the long term.
● Believe that there will be future demand for the product.

Resources links can be found at https://brightideas.co/saas-debt-funding/