Chapter 1 The Truth Shall Set You Free (from a lot of $#*% storms) You''ve got an interesting business, but we don''t believe it will ever get past a few million dollars in revenue. -Anonymous Investor I Pitched in 2009 In 2005, my coworker Matt and I were working in a run-down, shared office space above a noisy movie theater in Seattle when he walked in. A hairy, barrel-chested, fortysomething guy with gold chains, a mean grimace, and a stack of papers in a folder stared down at me. He asked, "Are you Rand Fishkin?" I was twenty-five years old, disoriented by his arrival, intimidated by his appearance and tone, and utterly panicked. I''m usually a terrible liar, so was taken aback by how quickly a response left my mouth: "Sorry, I don''t think he''s here." We exchanged a few more words, but I remember none of them. My heart was pounding. I hated lying, but I also had no idea what might happen if I identified myself.
Matt just put on his headphones and pretended to be engrossed in whatever website he was working on. When the extra from The Sopranos left, I called Gillian, president of our three-person firm (who also happens to be my mom). I told her about the unexpected visitor. She guessed he was a debt collector, sent by one of the firms to whom a bank had sold our debt. Oh, right. The debt. The $500,000 we owed, in my name, to finance our struggling consulting business. Ten minutes after I returned to my apartment (actually, Geraldine''s apartment-I was unable to pay my half of rent with my sometimes tiny, sometimes nonexistent paychecks, and couldn''t pass a credit check, either), I heard a knock on the door.
Assuming it was Geraldine carrying something she didn''t want to put down to turn the key, I opened up without looking through the peephole. It was the debt collector. "Ha! Gotcha," he said. I was mute. "You''re pretty good, kid. I totally bought that act today." Scared senseless, I just stared at him. He handed me the folder of papers I''d seen in his hands earlier and said, "Rand Fishkin, you''ve been served.
" I couldn''t even reach out to take them. He dropped them on the ground and walked away. Oops, I Accidentally a Startup In the summer of 2000, I was twenty-one with a year of college to go at the University of Washington in Seattle. I''m one of those lucky kids whose parents paid his tuition so he could "focus on his studies, not on work." That is, until I got into a fight with my dad and he threatened to cut me off. I was too prideful and stubborn to back down, apologize, or reconcile, so, for the next two quarters, I had to pay my own way. I worked part-time at the Wizards of the Coast Game Center, a giant arcade, gaming events center, and retail shop around the corner from campus. My $4.
75/hour salary was supplemented by buying PokZmon cards with my employee discount and reselling them on eBay and Craigslist for a tidy profit. I designed and built a few websites on the side for some extra cash. And, thankfully, in the early 2000s, college tuition hadn''t yet skyrocketed past the point of absurdity. A full quarter, including books, only cost around $3,000-a sum I scraped together while still managing to have enough to go out to the movies, buy the occasional used video game, and pay the rent on my small, shared apartment. But two classes away from graduating, I threw in the towel. Part of it was the cost, part of it was the lack of value I perceived from school, but a lot of it was because of a failed romantic relationship (long distance + breakup = broken heart). I wish I could say entrepreneurship was the catalyst for dropping out, but the truth is the other way around. I wallowed in a little self-misery, watched a lot of X-Files reruns, and only then realized I needed something to do besides work retail.
Web design was my path of least resistance. In 1981, my mom, Gillian, started a marketing consultancy in Seattle, helping small businesses with their logos, Yellow Page ads, brochures, and other print and advertising materials. In the late 1990s, her clients started asking for websites, and she recruited me to learn FrontPage, Dreamweaver, and HTML so I could help out. I liked the work, and the extra money, and when I told my mom I wanted to work with her full-time and not go back to college, she obliged. Over the summer of 2001, we dreamed big. Seattle''s tech scene was booming in Microsoft''s backyard. Startups like Amazon, Kozmo, and HomeGrocer dominated the local news. Everyone was switching from slow, dial-up modems to high-speed broadband.
We thought we had an amazing opportunity to design sites for local businesses that needed a presence on the soon-to-be-ubiquitous Internet. When the dot-com crash hit, I barely noticed. Our clients still needed websites, and I didn''t pay much attention to the falling prices, the late payments, or the commoditization of web design. For the next three years, we struggled against increasing competition, pervasive doubt about the web''s future, the challenges of getting our clients to pay their bills on time, and, worst of all, our own foolish beliefs about what would help our company grow. We were trying to sell our services in a crowded marketplace without a competitive differentiator. We wasted money on advertising that didn''t bring in business. We leased high-priced office space, convinced that an impressive building would help us close deals. We hired contractors and employees who didn''t work out.
We rented booth space at events that didn''t even pay for themselves. And, worst of all, we went into debt to do it. When I started working with my mom, she had a small amount of debt on the business-less than $20,000 in total. But three years later, we''d amassed an additional $100,000 of debt, much of it from the aforementioned missteps. The great thing about a consulting business is supposed to be the low-capital requirements-smart operators often make their consultancies profitable from day one. We went the other direction, and in 2004, after we''d failed to secure yet another client project we thought could put us on the path to success, we defaulted. It''s hard today to imagine the pre-2008-financial-crisis world of personal debt, where banks would extend loans of $50-$100,000 to a college dropout with a tiny salary. At the time, credit card offers arrived almost weekly, promising $10,000 limits that would quickly rise to $15,000 or $20,000.
Lending institutions were happy to offer us lines of credit and equipment loans despite our meager track record and nonexistent collateral. Promotional interest rates in the < 2 percent range were available for the first two to three years of an account. Seduced by these offers and in desperate need of cash just to make payroll and rent for three people, we went whole hog, racking up a balance that eventually came back to bite us. We took out loans and put them in my name because I had, at the time, nothing to lose. My mom had her and my dad''s assets on the line. They owned not only their home in Seattle''s suburbs but my grandmother''s house in Connecticut as well, which could have also been on the chopping block as collateral. So it was my social security number and my signature on the loans-something that, at the time, didn''t really scare me. Defaulting on these loans never really crossed my mind.
Two of the most memorable days in my early career came that fall, of 2004. The first was on a Sunday. Gillian had told me and Matt, my friend and our programmer, that we''d no longer be able to afford the rent at our pricey high-rise office tower. Moving out was our only option. We found a tiny shared office space in a run-down part of Seattle above an old movie theater for only a few hundred dollars a month (versus the $2,000-plus we had been paying), but we''d need to break our lease. That meant the landlord could potentially hold our equipment-including our computers, desks, chairs, and furniture-as collateral. We had to get it out of the tower and over to the new space fast, without anyone from the building noticing. This part''s straight out of a movie.
Matt and I recruited a pair of friends-Marshall and Todd, a couple with two sets of big arms, strong backs, and a spacious truck to whom we promised dinner-and quietly entered the building via the loading garage. We were halfway through loading up when the tower''s security guard arrived. Cue heart falling into stomach. After a brief, tense discussion on either side of our locked office door, we had the guard make a phone call to Gillian. Somehow, she convinced him to let us finish moving some of the items, but we had to leave a good deal behind to make it seem that we weren''t actually "moving out" but rather "moving some things around." With our pulses racing, we took Todd''s half-full truck out of the loading dock and across Lake Washington to our new, tiny, bare-bones but safe-from-seizure office. We''d sacrificed a good dozen pieces of unwieldy office furniture and some cheap supplies but felt lucky just to make it out with our computers and essentials. The next week, the company my mom had run for twenty-three years officially closed, and we started a new business under a new name.
But though we''d moved and changed our name, we were far from starting fresh. A couple of months later, that gold-chained debt collector showed up, and I called my mom in a panic. Even though the debt was being used for business purposes, the creditors would be coming after me personally because it was my signature and.