Professional VC investors are some of the biggest fans of my content about practical founders here on LinkedIn.
I talk to a VC or two every week. Most of them tell me how much they like what I’m talking about in the SaaS + funding game.
Most founders find this surprising since I’m generally advocating for most SaaS founders to stay away from raising big VC funding.
But this makes sense to me. Here’s why:
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Venture capital investors know they aren’t for most SaaS founders and companies. They talk to 200-500 serious founders a year just to make one or two investments. 99% of the time they are telling founders No.
Most founders they meet are savvy and most SaaS businesses they see are growing. Their No is just about the math and the odds that they can win their own investment-payback game.
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VCs understand the SaaS growth game and exit odds. They know how rare it is to achieve a successful exit that works for them and the founders, even when there is a lot of funding.
Most of the companies that big VCs want to invest in already have products, customers, revenues, teams, and growth rates. Many of these up-and-running practical SaaS founders tell investors “No thanks.” There are a lot of practical founders they would like to invest in who don’t want to play the big funding game.
- These VCs do not tell me my facts are wrong or that my conclusions are debatable. These investors are crystal clear about the invest-grow-exit game they are playing. This game is not a secret.
It’s the new SaaS founders who are unclear about how the VC funding game works and the simple math required for both sides to win. Most VCs aren’t going out of their way to explain this to newbie SaaS founders, but the VC game is what it is.
I asked a growth equity VC investor last week if he ever read anything in any of my LinkedIn posts that he disagreed with. He thought for a minute. “Nope,” he replied.
Investors call me because I occasionally refer serious founders to best-fit VCs to have a discussion about funding. The founder proved to me they understand the big funding game. And they demonstrated there is a big opportunity where outside funding would make sense to them and a potential investor.
Outside investment from professional VC investors in SaaS companies is rarer than most people think. VCs know this.
And it’s even more rare for a VC-funded software company to have a successful exit that works for both the founders and the investors. It’s possible, but not common.
We only hear about successful fundings and successful exits.
We don’t hear about the 80-90% of serious software businesses that don’t get (or want) funding.
And we don’t hear about the 50% of VC-funded investments that don’t pay out for the founders at all.
#practicalfounders
