When I tell people that my technology company regularly turns down seed funding, they look at me sideways.
But here’s what many don’t realize: rapid growth may not be the best thing for every company. Unmitigated and explosive growth — driven by an influx of seed funding — can result in an inflated sense of monetary success, alienated team members, and mismatched corporate priorities. That’s why my company, Toronto-based Hipo — a product studio that’s helped launch AI, computer vision, fintech, social, education, and healthcare businesses worth over $10B — has turned down seed funding three different times since opening doors ten years ago.
It may seem strange for a growing technology company to forego financial injection, but we at Hipo are more focused on sustainable growth than explosive growth; we’re more obsessed with quality than speed.
Here’s why I believe rapid growth isn’t always the best recipe for long-term success:
There’s no doubt that landing a round of seed funding is exciting. Maybe the announcement will help generate media buzz or allow your company to recruit new talent. Attracting investment is certainly an indicator of a company’s potential, and getting offers should be taken as a positive sign.
However, it’s easy to forget that accepting seed funding isn’t the same as generating revenue. The money isn’t yours and it’s not free. It will cost you, either in terms of shares or decision-making. And if you’re not careful, securing seed funding can take your attention away from the ever-important goal of acquiring customers profitably.
Let me be clear — growing your company is a good thing. But from my perspective, growth should be driven by revenue, not the other way around.
At the risk of sounding mushy, building a happy team is the single biggest priority for Hipo. We believe deeply in the power of fulfilled team members. Hipo isn’t just a company with employees — it’s a community of like-minded individuals that aspires to produce excellent work, to support one another, and to give back to our community.
So how do we build a happy team? We nurture internal talent and junior team members. We run an active internship program, often resulting in new hires. We fund professional development, including public speaking opportunities and second language training. We host weekly ‘Hipo Talks’, in which team members present on topics of their choosing (often unrelated to work), and we watch the talks as a team (despite team members working remotely from many different countries). We give back by supporting Re:Coded (teaching youth from conflict-affected countries how to code) and Django Girls (female-only programming workshops). We have annual ‘Hipocations’, where our whole team gathers at a resort for a week of work and play.
But guess what? Venture capitalists don’t care about any of that. Their job is to care about big valuations and quick exits, not sustainability.
Remember: your company is only as strong as the people within it. Accepting seed funding with the intent to grow rapidly is no guarantee that your team will continue to grow with you. On the other hand, by investing in your team’s wellbeing — and by truly putting people before profits — you’ll be building the kind of corporate culture that money can’t buy.
For many early investors, the end goal of investing in a company is to help grow it rapidly and hope it sells or goes public — with the intent of enjoying massive returns. If this doesn’t ring true with your company’s long-term vision, then you should probably think twice before accepting funding. A mismatch of corporate priorities and a loss of decision-making power can lead to years of energy-draining back and forth. And I’m guessing that’s not why you started your business.
At Hipo, we’ve yet to find investors who share our vision of sustainable growth and team well-being. And by the looks of it, we’re not alone.
As more and more companies question traditional funding models, we’re seeing a new type of capital crop up: ‘alternative funders’ who don’t lose sight of a company’s original vision. Funders such as Indie.vc, Purpose Ventures, and TinySeed are changing the game before our eyes. Instead of banking on potential and praying for profit, many of these alternative funders are investing in companies that are already financially viable. Some funders even include the option for companies to buy back shares.
It’s the kind of measured and sustainable funding model that could work for companies looking to grow better, not bigger.
About the author
Taylan Pince is the CEO & Founder of Hipo, a product studio that has helped launch businesses in a myriad of industries, including healthcare, finance, smart home, education, and natural sciences. For the past two decades, Taylan has focused on developing tech products that improve lives and change industries. His expertise in product design and development, as well as mobile, web and emerging technologies, have contributed to the success of more than 100 companies worth over $10B collectively.