Chicago investors ‘a much more conservative group’

Many tech companies pitch venture capitalists before they’ve managed to make a profit, but Braintree Inc. had been making money for four years before turning to outside investors. The software company, which helps clients handle credit card payments, was founded by Bryan Johnson, 34, while he was completing his executive MBA at the University of Chicago. Last June, Braintree took $34 million from Accel Partners, something Mr. Johnson says he initially did not plan to do. “I wanted to build a successful company that was enduring and thoughtful and meaningful,” he says. “I wasn’t interested in raising a whole bunch of money and running as fast as possible and flipping the company as quickly as I could.”

CRAIN’S: How did you arrive at the decision to take the money from Accel?

MR. JOHNSON: We were receiving emails and phone calls from investors every single day for three years because their portfolio companies were our primary customers and they heard nothing but positive things about us. In 2011, we were on track to do more than $3 billion in credit card volume, which is a huge number in our world. We were so excited about that, but our banks weren’t as excited. We had a healthy balance sheet, but it certainly was not the size that was going to cover $3 billion in volume—in risk. We knew that if we wanted to be in this game, we had to ramp up our beat and the scope of what we were doing. We just didn’t have the connections, the experience and the capital to pull that off.

You say you’ve never had an unprofitable quarter. How important was that in your negotiations with Accel?

We were in the fortunate situation where we could choose a partner and the terms that made the best sense for Braintree. We had time and options, and I was always willing to walk away from any situation. We were first and foremost focused on building something exceptional, maintaining our culture and continuing to build Braintree on our own terms.

Now that you’ve taken outside investment, what are the most critical things you have been able to do that you couldn’t without that money?

They’ve connected us with many people with whom they’ve had long-standing relationships, that have proven beneficial to the business but which we would have had great difficulty reaching ourselves. These new relationships have helped us across the board, including recruiting, strategy, culture, product and publicity.

You also built a business during the dot-com boom (Inquist, an Orem, Utah-based VOIP company that failed in 2001). What are the major differences between then and now, between Silicon Valley and Chicago?

In Chicago, it’s a much more conservative group of investors. They want winners, so companies need to show the path, the profitability; they need to demonstrate the viable model. I think you get more base hits and doubles in Chicago and more home runs in Silicon Valley because they’re just a larger number and there’s also more bets being made. I think you find, generally, a more conservative entrepreneurial base out here that is more focused on building profitable, stable, lasting businesses.

Do you intend to file for an IPO?

We don’t currently have any plans for an IPO. We’ve learned that if you focus on the right things, everything else has a way of taking care of itself.


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