Why Ahrefs Founder Ignored Interest From Sequoia-Level Funds
With the recent Grab List on everyone’s lips, startups have never looked so sexy.
But just as many founders dreamed of achieving supercharged growth culminating in a glorious IPO, there are also people who believe in growing their startups the traditional way: without the help of venture capitalists (VCs). ).
One such bootstrap supporter is Ukraine-born Dmitry Gerasimenko, whose Singapore-based start-up Ahrefs sells search engine optimization (SEO) tools.
Ahrefs spent his first year in Ukraine before moving here in 2012, after which Sequoia-level funds quickly began to reach out.
“I believe I have received emails from almost every active venture capital fund in the world,” Dmitry said.
“At first I tried to set up a call to answer my curiosity. But I quickly stopped responding to emails. We were profitable in the first year and we progressed at a very good pace, so external funding was not necessary. “
Hit Sales of S $ 1 million in the first year
Dmitry is no stranger to business. While studying applied mathematics at university, he ran a side business as a developer, creating and selling several software solutions, before dropping out of school to pursue the business full time.
One of these solutions eventually developed into Ahrefs, which earns revenue from the sale of subscriptions to its SEO toolkit.
Less than a year after the launch of paid subscriptions, the company reached $ 1 million in annual recurring revenue, as the features offered by its toolkit were popular.
Dimitry used US $ 300,000 in savings to start Ahrefs, and attributes his success to his ‘ladder’ process of creating a product – selling it for a small profit, then using those profits to fund the next bigger product. .
Many startup founders want to avoid climbing that ladder and would rather take the elevator. The ticket for this elevator is sold by VCs and is paid for with your company’s equity, with total loss of control and lower chance of success.
– Dmitry Gerasimenko, founder of Ahrefs
Other startups may not need the financial help, but are looking to VCs nonetheless, believing this to be the standard path to becoming a unicorn or completing an IPO, he added. .
These funds constantly push startups to continue increasing their income in order to achieve better valuation. But as the funds invest in hundreds of companies, they are “okay, most of them fail, as long as a few of them become unicorns.”
“Venture-funded startups don’t survive very well in the long run because their mentality is ‘all or nothing’. This is how the founders keep themselves from experiencing moderate levels of success and changing their lives for the better, ”said Dmitry.
“So maybe if your startup survives its early years, you could shoot yourself in the foot by going to VC.”
The freedom to make movements that benefit others
Between 2016 and 2020, Ahrefs’ revenue grew from S $ 16 million to S $ 88 million, and its annual growth rate is around 35%.
However, the company does not use conventional growth metrics, such as churn and revenue, to gauge its success. Instead, it assesses areas such as the reach of its educational material – which is part of its marketing strategy – and its impact on the community and customers.
Accepting venture capital funding would have put pressure on Ahrefs to increase its valuation, which would contradict its ethical goal, the founder said.
As part of this goal, the startup has made business decisions that “don’t make a lot of sense in the VC world,” including making it easier for customers to opt out of packages, avoiding cookie-based targeting, and protecting user privacy and data by not tracking behavior.
Ahrefs is also working on a search engine that will share 90% of its ad revenue with websites in order to fairly compensate content creators.
“I don’t see how a venture-backed company can work on such a project,” Dmitry said, adding that startups can stay afloat just by keeping costs below income.
One way to do this is to spend efficiently.
The Ahrefs founder cites the example of how his company keeps personnel costs low by choosing not to hire salespeople. Instead, he aims to develop a product that is good enough to sell. Ahrefs’ customer pool includes Netflix, Uber, Facebook, and TripAdvisor.
Staff welfare is another area where he has optimized spending.
The boot avoids the splash of perks like ping-pong tables and free booze in the office. Instead, it rewards employees in a more targeted way. Last year, his team of 68 went skiing in the Alps before the pandemic hit and then got S $ 8,000 to spend to stay after that.
At this point, we have sufficient resources to improve our services and provide more and more value to our customers and the community at large.
So I really appreciate the situation we find ourselves in right now: we have a strong team, we have the resources and we don’t have the pressure to increase revenues at any cost.
– Dmitry Gerasimenko, founder of Ahrefs
Featured Image Credit: Ahrefs
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