Building Profitable SaaS: Funding, Growth, and the Alternative to Venture Capital

Executive overview

Rand Fishkin, co-founder of Moz and now Spark Toro, shares lessons from building venture-backed and bootstrap models. The conversation explores why profitable, sustainable SaaS companies should be treated as legitimate wins—not failures—and how traditional venture capital structures prioritize unicorn outcomes over healthy businesses. Venture capital exists because of tax advantages, not because it's the best model for founders.

Why venture capital became dominant

The venture capital model evolved in the 1960s–70s as a tax dodge for wealthy investors seeking capital gains treatment. This created a cultural belief in Silicon Valley that founders must chase billion-dollar valuations, even when it's harmful to their companies and often concentrates gains among a small elite. The mechanism filters for already-wealthy founders: roughly 90% of venture-backed founders come from family wealth.

Lessons from stepping down at Moz

Fishkin stepped down as CEO of Moz in 2014 during a bout of depression, but remained with the company for four more years. He cited three reasons for staying: identity (he saw Moz as his legacy), a promise to the new CEO, and pressure from the board to maintain the brand. Retrospectively, he should have left within a year. The longer he remained, the more awkward internal dynamics became, especially as the company's growth slowed. Being stuck between venture expectations and profitable-but-not-unicorn performance created tension with investors and leadership.

The venture trap: "stuck in the middle"

When a venture-backed company achieves strong revenue ($50M+) and profitability but not exponential growth, it frustrates venture investors. Venture returns require 98 of 100 bets to fail; companies that "waste board time" in the middle ground—profitable but not unicorns—face fire sales, forced CEO changes, or recapitalization. Moz experienced this dynamic, even though a healthy independent investor would celebrate those metrics as a win.

Bootstrap alternative: Spark Toro's model

Fishkin launched Spark Toro with a different approach: raising a small angel round ($900k) from 36 like-minded investors, structured as an LLC with pass-through taxation. The company became profitable at $40k MRR within nine months of public launch. The upside: founders keep control, investors share dividends, and the incentive is sustainability. The tradeoff: investors must accept ordinary income taxes rather than capital gains treatment, which filters out tax-averse LPs but attracts aligned backers.

Building Spark Toro: product and pricing

Spark Toro is a market research tool that helps founders discover what their audience reads, watches, and follows. The soft launch in February 2020 coincided with COVID-era layoffs, dropping conversion rates. Fishkin made the free tier more generous and launched anyway in April. By September, after working with a conversion optimization agency, he redesigned the homepage, rewrote copy, changed pricing, and improved the product layout. These changes tripled conversion rates and pushed the company to profitability. Today Spark Toro has 30,000 free users, 500+ paid subscribers, and deliberately accepts high churn: many customers only need the research tool once or twice yearly.

Why Fishkin avoided full-time hiring

The company is run by two founders using contractors and agencies. Fishkin prefers this because agencies are performance-based—they keep working only if results improve. Full-time employees carry different incentives: keep your job, get along with the team. Agencies have no job security if metrics stall. This aligns incentives and reduces the risk of wasted effort.

Growth levers for B2B SaaS

Traditional content marketing and SEO dominated for 20 years but have eroded. Google now puts ads, featured snippets, and instant answers above the fold, reducing organic traffic. LinkedIn, Facebook, and Twitter algorithmic reach have collapsed—organic impressions on Facebook fell from 11% in 2015 to 0.09% today. Fishkin now focuses entirely on owned channels: his blog, email newsletter, and direct audience building. He uses social media as an "engagement streak" tactic—post repeatedly to build familiarity, then slip in links every fourth or fifth post before the algorithm suppress visibility. Email and SMS remain the only social-agnostic channels; owning your email list insulates you from algorithm changes and platform bans.

The hub-and-spoke model

Content should live on your owned domain (the hub) and be amplified across social networks (the spokes). Many creators depend entirely on TikTok, Instagram, or YouTube and neglect to build a presence on their own site. This is risky: when those platforms change their algorithms or ban creators, the audience and revenue disappear. Fishkin recommends any TikTok influencer convert their videos to a library on their own website and promote that, even if it lowers reach by 80–90%. Owning a channel long-term is worth the short-term traffic sacrifice.

Why the old model worked better

Before the 1980s, the economic incentive at the top was to build long-lasting, profitable companies that paid dividends. Founders had stability, pension systems existed, and employees stayed at companies for 30+ years. Tax law and Wall Street dominance shifted incentives in the 1980s toward growth-at-all-costs and exit-driven outcomes. Venture capital became the primary model, and it's now treated as the default path for ambitious founders—even though it's often worse for founders, employees, and economic equality.