Growth equity investors don’t chase unicorn returns

Three (other) SaaS founders I advise are planning to raise sizable rounds from VC investors this year.

These founders are NOT talking to the biggest Silicon Valley VCs that require unicorn returns.

They are talking to growth equity VCs who invest in software companies that are “less crazy” about growth and spending.

For these founders, raising a serious equity round makes the most sense, for three reasons:

1) The Category race is on
These founders want to be the leaders in their new categories when their category gets big. The race is on for category leadership. Big funding can help them accelerate and win.

2) Equity valuations are high
It’s a good time to raise venture funds for any SaaS company. Valuation multiples (of revenue) have doubled or more in the last year to 10x+ for growing early-stage SaaS businesses.

3) They have raised funds already
Each of these founders has already raised angel and seed funding from outside investors, so they have already declared the game they are playing–grow fast, get big, sell the company. That game requires more funding at each new stage of growth.

VCs invest in fast-growing tech disruptors who can be big category leaders fast. That’s not most software companies–maybe 20% have VC-return potential.

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