Mada Seghete, co-founder of Branch, speaking at the Web Summit tech conference in Lisbon, Portugal.
Vaughn Ridley | Sportsfile | Getty Images
LISBON, Portugal — When a start-up raises money, it shouldn’t necessarily be seen at as a good thing, according to the co-founder of tech unicorn Branch.
Mada Seghete, Branch’s head of strategy and market development, said that though getting funding is a “necessary” step for new companies, it comes at the expense of a team’s ownership in their business.
“We will never ever celebrate a fundraise,” Seghete said at a CNBC-moderated panel at the Web Summit tech conference. “When you raise money, it’s definitely important that you raise money to fuel your company.”
“But you do give out a percentage of your equity, you dilute yourself and your employees, and it’s not necessarily something to celebrate,” she added.
Based in Redwood City, California, Branch sells a technology known as deep-linking, which helps clients create links that direct users to a certain point on their website or app. The company has raised $113 million in funding to date and is backed by Android founder Andy Rubin’s Playground Ventures.
Branch last year secured a $1 billion valuation, lifting it into the ranks of an ever-growing group of companies known as unicorns. Venture capitalist Aileen Lee, whose seed-focused fund Cowboy Ventures is another investor in Branch, is thought to have coined the term unicorn in 2013, referring to how rare such firms were at the time.
Seghete said that start-ups should avoid cheering the accession of their businesses to unicorn status, adding they should instead focus on celebrating goals like an increase in revenues or success with customers.
“Those are the kind of things you need to celebrate versus the company becoming a unicorn or raising money,” she said.
Melanie Perkins, co-founder and CEO of Australian online design start-up Canva, agreed. Her company, which makes an app that lets non-designers create things like business cards and social media posts, was recently valued at $3.2 billion after notching a fresh round of funding backed by well-known venture capitalist Mary Meeker’s Bond Capital.
Perkins says she and her fellow co-founders bootstrapped Canva for some time before taking on external capital. And unlike high-profile unicorns like WeWork and — until earlier this year — Uber, Canva is profitable, Perkins said.
“Not having outside investors that had opinions about what we were doing gave us the time and space to build a profitable company to build a product,” she said.
“I think there can be a little bit too much overemphasis on getting funding in the current climate. It’s really important to solve a problem that matters to people. And I think that the further you can take it without getting outside funding, the more control you have over your destiny.”
Though Branch isn’t yet profitable, Seghete said it “definitely” has a plan in place to breakeven in the next few years.
Lucy Liu, co-founder of financial technology firm Airwallex, said her firm hasn’t yet reached profitability either. Airwallex’s platform is used by businesses to make cross-border payments at competitive exchange rates.
Liu said that growth-stage businesses like hers have to balance making profits with growing at an aggressive pace and meeting the expectations of investors that have bet heavily on a venture’s ability to scale.
“Profitability is something that is always at the back of our head,” she said. But, she added, “it’s actually a bad thing that you’re not spending all the money that you’ve raised. They don’t give you all the money to be put in the back as cash.”
View original Post