When should a serious SaaS founder raise outside funding from institutional investors—and when should they not?

There are only a small minority of software companies where a bigger investment bet with more risk could make sense for the founders.

Here’s the surprising thing: VCs agree.

A VC has yet to tell me, in person or on LinkedIn, “No, Greg, you’ve got it wrong. Most SaaS founders should raise funding from venture investors!” Ever.

They know that VC funding is for a narrow slice of startups that can grow big fast enough with founders who want to bet big to create a monster exit.

But VCs are not saying this out loud. We don’t hear this at crowded VC pitch events.

It’s a sin of omission—they know it but don’t say it.

So we are left with the perception that “everyone’s doing it” and “this is how you play the game” because we only see the big headlines.

But this week, a new VC investor, Gregg Scoresby, said it clearly in our discussion on the Practical Founders Podcast.

Gregg has a seed fund, PHX Ventures, that supports B2B SaaS startups with high growth potential in Phoenix, Arizona.

He is a 3X tech founder who is now investing his and others’ money to help create more big and successful software companies in Arizona.

Gregg started, grew, and just sold CampusLogic, a Phoenix-based software company that had grown to $50 million in revenue before it was acquired in December 2021.

Gregg started CampusLogic with his own money and then grew it with venture funding. But he was always capital-efficient and disciplined about funding, spending, and growth.

So I asked Gregg, “When should a serious SaaS founder raise outside funding from institutional investors—and when should they not?”

Here’s what Gregg said, loud and clear:

“I don’t think founders should raise more just to raise more. In fact, if you could raise nothing, you should raise nothing. If you can build a company and achieve the type of outcome that you want to achieve and not raise capital, you should do that—100%.

“But several things could justify a founder taking outside capital. Like when a B2B SaaS company is efficient and they’re a high growth company, but they’re in a very competitive market and they want to be number one in that market. You want to hire more salespeople, so you can’t wait until you’ve got a couple hundred thousand dollars in the bank.”

“Or if you have to build a new product or there’s a lot of complexity with building in a regulated environment. Those can be good reasons for going faster with outside investment.”

We talked about the PHX Ventures approach of supporting capital-efficient SaaS founders who don’t raise big and spend wildly.

It’s a great episode with a practical investor and a savvy SaaS founder whom I have known as a friend for over ten years in Phoenix.

Listen to this expert interview on the Practical Founders Podcast.

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