When you don’t raise VC funding, the diversity of founder personalities, locations, styles, values, ages, speeds, and visions is almost limitless.
But there are three critical traits that all successful SaaS founders share who are building valuable software companies without big VC funding.
In this week’s Practical Founders Podcast episode, I share the hidden patterns from over 140 podcast interviews with successful founders.
The first important trait that seems normal, but is actually very rare:
Practical founders love the steady compounding game.
This is not normal in a world that loves the fast start, the short term, the quick fix, and the easy hack.
It’s just not common to deliberately build a business (or anything) that you know will grow at the same steady (but not crazy) rate next year.
Recurring revenue businesses require this approach, even when you are starting and surviving.
Practical founders do the work to build a flywheel that will continue to grow and thrive–next year and the years after.
They invest in the right things now that will pay off years from now. This is much harder to do than it sounds.
A 30% growth rate is not interesting to investors when you are starting up.
That’s why practical founders would rather be frugal and disciplined than raise silly investment.
Ironically, a larger software company efficiently growing at 30% per year is EXACTLY what most acquirers are looking for.
A lower growth rate doesn’t mean you’re creating a small company.
“The simple math is that a $1 million ARR recurring revenue business that grows at 30% a year will become very valuable if it keeps growing. Not crazy growth, but a reasonable pace. This is the fundamental principle of recurring revenue businesses: it’s a compounding machine.
“If you grow at 30% for nine years, you’ll have a $10 million revenue business. And if you do that for another nine years, you will have a $100 million revenue business. That’s probably worth a billion dollars by that time. That sounds simple and not everybody gets there, of course, but practical founders think in this way—steady, healthy compounding.”
There are many ways to create a valuable software company. Fast, slow, funded, bootstrapped.
Practical Founders love to keep improving and do it efficiently with steady, healthy, compounding.
Key takeaways from the podcast:
- Frugal Yet Bold – Practical founders are unusually frugal in life but make well-timed bold bets inside their companies.
- Managed Risk – They avoid betting the whole company, instead making small bets that can compound into larger wins.
- Do-It-My-Way Premium – Protecting their ability to do it their way is treated as a strategic advantage.
- Optionality Matters – Practical founders value flexibility to sell, go long, or change direction without outside control.
Are you wired like a Practical Founder?
Check out this episode on the Practical Founders Podcast.
