I know 20+ founders who sold their business in the last year who didn’t raise any outside funding or were unusually efficient in raising capital.
These founders had a much higher “exit success” rate than other founders I know who raised big money early from VC investors.
Here’s why:
1) These founders grew successful businesses to $5M-$15M ARR revenue, which is big enough to be valuable to strategic acquirers for interesting multiples of revenue.
But these founders didn’t raise big VC investment. So they were able to sell their companies for $15M to $75M when serious acquirers came knocking.
If you raise a big series A round from VCs, you don’t get to sell your company for $50 million. You are placing your bets on a longer game to grow your company up to $50M or $100M revenue, with more funding along the way. This is a bigger game you are playing with higher risks, but you can’t sell “early.”
I think there are also 10x more acquirers who will buy for sub-$100m amounts than acquirers of $500m+ deals.
2) The bootstrapped-efficient software company founders focused on being a big players in a smaller markets where they could have a strategic impact.
This is typical in vertical markets that aren’t big enough to have “VC-scale returns” for unicorn-hunting VCs. Too small for VCs, but better odds of a better results for founders and their teams.
3) These founders were laser-focused on customers, products, efficient customer acquisition, and employee productivity. Extreme discipline and fast learning.
The time they didn’t spend on raising money and going to conferences was focused on selling, serving, improving, and not waiting for outside money to solve their growth problems.
4) They achieved high valuation multiples because they had created efficient business models for growing revenues, competing, and expanding their markets.
Their businesses weren’t addicted to unsustainable “growth steroids” that VC funding often creates. If you’re not desperate for and dependent on investment, you can say no and negotiate better than if you have to do a deal.
The 20+ founder friends who walked away with life-changing wealth*–for themselves and their key leaders–were the ones who bootstrapped or were unusually efficient in raising capital.
Most of the founders I know who raised big and early didn’t win a big exit prize, but they did work hard to cover their investors’ bets and take care of their employees. That’s important but not a big win all around.
Only two of my founder friends raised VC Series A, B, etc., and made it to big exits in the last year. Big news, but a small fraction in my network.
Just saying…
* Life-changing wealth for these founders is at least $10M-$30M, sometimes more.
