Practical Funding

Most software companies don’t have big VC funding

This month we just crossed 6,000 companies on Gregslist – my curated list of all software companies in 12 cities in the US.

A curious thing becomes starkly visible when you track all the active software companies in big cities outside Silicon Valley:

  • 52% of all active software companies on Gregslist are self-funded with no outside funding.
  • Only 22% of companies have serious venture capital or private equity funding investment. Or are public.
  • And 13% have some outside angel or seed funding, which means they are still getting started and don’t have big funding yet.
  • The rest have been acquired and are operating independently as part of a larger company.

I could win a lot of bets asking people what percentage of software companies have big funding.

Startup founders usually assume it’s 75% or 90%. Isn’t funding what all startups do?

But it’s really just a minority of software companies and startups that have big funding.

Oddly, the VCs I know assume it’s 10% or fewer that have VC funding. The complete opposite.

VCs are serious investors who are looking for the 1% exceptional company in the small subset of companies they talk to.

As you would expect, startup and smaller software companies have a higher rate of bootstrapping or just a little funding than bigger software companies.

But our data show that 33% of software companies with more than 50 employees still have no outside funding compared to 31% with big VC funding.

VC funding isn’t bad or wrong, it’s just not for most software companies and their founders.

It’s not the only way to grow a valuable software company. Even in Silicon Valley.

It’s just all we hear about in social media and tech media and local tech ecosystem boosterism.

There is a growing crowd of practical founders who are efficiently growing their software companies with revenue from customers–without big funding.

And they are selling their software companies for 10X revenues on average, just like the big guys.

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