Bigger Exits for Founders Who Didn’t Take Big VC Funding

A practical founder told me yesterday that he made a bet with a friend many years ago.

Who would end up with a bigger prize when they sell their companies someday?

His friend had raised big Silicon Valley venture capital, but he had self-funded his own software company from his services business.

This practical founder won the bet.

He ended up with a much bigger “slice of the pie” overall than his funded friend.  Even though his friend sold his company for a LOT more money.

I hear this all the time.

How practical founders with little or no outside funding grew their startups into valuable software companies.

When they sell their companies for $20M or $40M, the founders and their teams get all of that prize. Or most of it.

When funded founders sell 50% or more of their company to investors, they actually have to sell their companies for 3X or 5X or 10X MORE than they would if they didn’t raise big funding–just to win the same prize.

Bigger exits in the $500M to $1B range are possible. But those 5X or 10X “bigger pie” bets with big outside funding don’t win that often.

Possible, but not probable.

That’s why I don’t think big funding should be the default scenario for most founders of software and SaaS startups.

The software game has changed in the last 5 years. You just don’t need big funding to get started today, in most cases:

  • Software products don’t take millions to build.
  • Getting to $1M or more of SaaS revenue is possible without investing $2M or more of outside funding.
  • A $1M or $3M or $5M ARR software business is worth 5X-10X revenues in today’s market.

In most cases with most founders, you just don’t need to raise big outside funding to create a very valuable software company.

There are many ways to efficiently self-fund and get just a little angel investment to get into revenue. Fund with revenues from there.

IF you get your software company up and running AND you do the math to see that you have really good odds for founders to get a bigger result with big outside funding AND you think you can change the world in a much bigger way, then you should go for it.

To consciously opt-in for the right kind of funding that will be a multiplier of value for everyone.

But it’s a bet.

Interestingly, we read about successful VC-funded exits all the time. They show up in the news.

Sales of practically-funded software companies don’t make the news. We don’t read about the better math for practical founders and their bigger prizes.

There are a LOT more of these practical big exits than people see.

That’s why I started the Practical Founders podcast. To share those countless untold success stories.

It’s great that both founders in this bet succeeded in growing and selling their companies.

But the “uncool” founder who didn’t take outside VC investment won the bet.

Now he and his family don’t just have life-changing wealth, they have “inter-generational” wealth, as he says.

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Win the Startup Game Without VC Funding

Learn how all 75 founders on the Practical Founders Podcast created an average founder equity value of $50 million.