Why the founder of Ahrefs ignored the interest of Sequoia level funds

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With Grab’s recent list on everyone’s lips, startups have never looked more attractive.

But just as many founders have dreamed of achieving overburdened growth that would culminate in a glorious IPO, there are also people who believe in growing their businesses in the traditional way: without the help of venture capitalists (CVs).

One such proponent of the startup is Ukrainian-born Dmitry Gerasimenko, a Singapore-based startup. Ahrefs, sells search engine optimization (SEO) tools.

Ahrefs spent his first year in Ukraine before moving here in 2012, after which funds at the Sequoia level quickly began to arrive.

“I think I’ve received emails from almost every active venture capital fund in the world,” Dmitry said.

“At first, I tried to make a call to satisfy my curiosity. But I soon stopped responding to emails. We were profitable from the first year and we grew at a very good pace, so we didn’t need external funding ”.

To hit Income of S $ 1 M during the first year

Image credit: Ahrefs

Dmitry is no stranger to business. While studying applied mathematics in college, he worked as a developer, creating and selling various software solutions, before leaving school to pursue a full-time business.

One such solution ended up becoming Ahrefs, which earns revenue by selling subscriptions to its SEO toolkit.

One year after the launch of paid subscriptions, the company earned annual recurring revenue of $ 1 million, as the features its toolkit offered were popular.

Dimitry used US $ 300,000 in savings to start Ahrefs and attributes his success to his “scale-like” process of creating a product: selling it with a small profit, and then using those profits to fund the next product more great.

Many startup founders want to avoid climbing this ladder and prefer to take the elevator. VCs sell the ticket for this lift and pay for it with your company’s net worth, total loss of control and lower chances of success.

– Dmitry Gerasimenko, founder of Ahrefs

Other startups may not need financial help, but they turn to VC, believing it to be the standard way to become a unicorn or get a IPO.

These funds constantly push startups to continue to increase revenue for better valuation. But since the funds invest in hundreds of companies, they are “fine with most of them failing, as long as some of them happen to become unicorns.”

“VC-funded companies don’t survive that well in the long run because their mindset is ‘all or nothing.’ That’s how founders are excluded from enjoying moderate levels of success and changing their lives for the better.” said Dmitry.

“So maybe if your company survives in the early years, you might get shot in the foot by going to CV.”

The freedom to make movements that benefit others

Image credit: Ahrefs

Between 2016 and 2020, Ahrefs ’revenue grew from $ 16 million to $ 88 million and the annual growth rate was around 35 percent.

However, the company does not use conventional growth measures, such as the exchange rate and revenue, to assess its success. Instead, it evaluates areas such as the scope of its educational materials (which are part of its marketing strategy) and the impact of the community and the customer.

Acceptance of venture capital funding would have pressured Ahrefs to grow its valuation, which would be at odds with its goal of being ethical, the founder said.

As part of this goal, the startup has made business decisions that “don’t make much sense in the CV world,” including making it easier for customers to download packages, avoid cookie-based guidance, and protect privacy and privacy. user data. not tracking behavior.

Ahrefs also works on a search engine that will share 90% of its advertising revenue with websites to equitably compensate content creators.

“I don’t see how a VC-funded company can work on this project,” Dmitry said, adding that startups can stay afloat simply by keeping costs lower than revenue.

One way to do this is by spending efficiently.

Ahrefs founder sets the example of how his company keeps staff costs low by choosing not to hire salespeople. Instead, it aims to develop a product good enough to sell itself. Ahrefs’ customer group includes Netflix, Uber, Facebook and TripAdvisor.

Another area that has optimized spending is staff well-being.

Image credit: Ahrefs

The start-up avoids splashes of perks like ping pong tables and free drink in the office. Instead, it rewards employees in a more specific way. Last year, his 68-man team went skiing in the Alps before the pandemic hit and then raised $ 8,000 each to spend on resort stays after he did.

At this time, we have enough resources to improve our services and provide more and more value to our customers and the community at large.

So I really like the situation we are in now: we have a strong team, we have resources and we don’t have the pressure to grow revenue at all costs.

– Dmitry Gerasimenko, founder of Ahrefs

Featured Image Credit: Ahrefs





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