Practical Founders Blog

The chart below says, "You should raise tons of VC funding and try to be valued over a billion $ by those private funders." This chart also can say five other things that founders should understand. 1) There is a place for VC funding. ...

Profits are often underrated in software companies that are scaling up. Why run profitably if you could raise funding and grow faster? Selling equity for growth funding can create a great ROI for founders. Sometimes, but not usually. VC ...

It still needs to be said, even in the age of AI-first startups: The default case for 80-90% of SaaS startups is never to raise VC funding. VC funding has always been the exception and not the rule in the software business. This isn't ...

Growth equity and private equity sound similar, but savvy SaaS founders need to understand several fundamental differences. Yes, they both raise funds from investors and then invest in practical SaaS businesses that are growing steadily and ...

Big VC funding is the most expensive growth capital on the planet when your company has rocket-ride growth that requires rocket-fuel VC funding in exchange for equity. There are more practical forms of equity funding from angel investors or ...

This week I met a founder of a SaaS startup who asked me, "So you can build a software company without big outside funding?" My first thought was, Uh oh. He's going to get in trouble fast. I'm not against VC funding or VCs. I'm against ...

Most VCs have moved on from "traditional" B2B SaaS companies and are focused on AI-first companies. It's nothing personal; it's simple math. Most B2B SaaS companies will not double revenues yearly for the next 5-10 years, even if they add ...

The most common conversation with a new software founder starts with the question, “What should I do about _____?” I reply, “There are several ways to do it. It depends on what kind of company you are trying to create in 5 or 10 years.” ...

It’s better to have a smaller slice of a bigger pie, so you should raise as much VC funding as you can.” The “bigger pie” pitch is a popular closing line in the funding game. C’mon, kid, bet it all. It’s what serious founders do. When you ...

When pre-revenue SaaS startup founders ask me, “Do you think this is a great product idea?” my answer is always the same: “I don’t know. And neither do you.” My opinion of your customers’ problems and the usefulness of your software ...

The folks at SaaStr asked their LinkedIn audience, "If you had to do it over again, would you raise more or less venture capital?" 42% of respondents answered, "Neither - I would bootstrap my company if I did it again--with no VC funding at ...

This week, 3 SaaS startup founders told me people are telling them to raise a seed round of VC funding. They asked me if they should listen to these experienced mentors and play the big funding game. - Each has an early product, some ...

Most people don’t know that when a practical SaaS company raises money from a growth equity investor or private equity investor, those dollars mostly go to the founders. It’s not risky rocket fuel for the business like the VC funding ...

Serious SaaS startup founders are starting to see how pursuing big VC funding too early will decrease their odds of success. Like buying a lottery ticket for a bigger Powerball prize, the odds go down the more money you raise early in your ...

Why do venture investors tell SaaS founders they invest for 10x to 100x returns when a VC fund would do great with a 3-5x lifetime return? It's simple. It's the massive churn problem in venture investors' portfolios. Most of their investments ...

Most SaaS founders who have successfully sold their companies say they will start another software business, even when they have already had serious monetary success. They love the difficult puzzle of solving big problems with cool software ...

I talked with Rand Fishkin this week on the Practical Founders Podcast about what he has learned six years after publishing his book, "Lost and Founder." In 2018, Rand published “Lost and Founder” in which he revealed the pains and pitfalls ...

The glum news that "VC funding is down again this quarter" doesn't matter to more than 80% of new software companies around the world. The startup environment for modern SaaS founders is much better than it was just a few years ...

The Power Law of VC investing means that just a few of their startup investments create all their returns. It's a game of a few blockbusters, not a game of averages. The Power Law of venture investing applies to venture funds themselves. ...

I talked to a bootstrapped SaaS founder today who asked me, "Should I raise a little funding this year?" Here's his situation, my questions, and my recommendation. It always depends. I know this founder well. He has boostrapped a vertical ...

It used to be bad news for a bootstrapped software company when a competitor in their space raised big VC funding. Now, there are plenty of examples where bootstrapped SaaS companies can do just fine or sometimes even win bigger. It's an old ...

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 ...

An old term has become more popular in the last year to describe a style of software companies of all sizes: Capital Efficient. It can mean 3 very different things for SaaS founders in 2024: 1) Most VC-funded software companies that gorged on ...

This year, there has been more discussion about practical "One-and-Done" rounds of angel, pre-seed, or seed funding for startup SaaS founders. But it usually ends up being "More Than One and Never Done," which adds far more risk for founders ...

A bootstrapped software startup founder I know presented her 2024 business plan this week. Her progress and plan were impressive, but they were the opposite of the story a VC-backed founder would tell. Two years ago, she was getting her ...

The Power Law drives the venture investing business model. Every VC investor's success is powered by a few blockbuster 50X-500X returns that make up for the 75% of their bets that either go bust or don't win much. There's no defying the Power ...

When you raise big VC funding, the chances increase that you will listen to your investors about what product to build and what business template to follow. When you DON'T have big outside funding, the chances increase that you will listen to ...

It was reported by Pitchbook this week that 3,200 funded startups failed this year. This isn't the end of VC funding; this is how that game works.  Boom times before back to normal.  Big bets before failures.  Overspending before ...

What’s more common than big VCs investing millions in pre-revenue startups? Founders funding substantial software development, design, and sales cycles from the profits and staff of their other businesses. It is often a related services ...

There's a common assumption that startup funding means big VC funding from professional investors. This is not true at all. But all startups are funded in some way in time and money to get started, including the majority of software startups ...

It needs to be said: The default case for 80-90% of SaaS startups is never to raise VC funding. VC funding has always been the exception and not the rule in the software business. But in recent years, "Go Raise Funding" became the standard ...

For SaaS founders to succeed at the big VC funding game, they need to hit their ambitious growth goals every year and then sell the company for a big payoff in 5-7 years. VCs will tell you this rarely happens. But they don't advertise this ...

Some folks are waiting for the boom times of two years ago in software tech to return, but this is now the "old normal" and it will be this way for years. Things have slowed down in most parts of the software business compared to 2020-2021 when ...

A practical SaaS founder I know sold his software business last month for a successful majority exit. It was a great business with over $10M ARR and no outside investors. We had several conversations in the last few years about all the ...

I have been asking VC investors: What percentage of the pitches they see will be great SaaS businesses for the founders but aren't a fit for their fund? The average is 30%. One in three software companies they look at are great founder-scale ...

The chart below explains why there's a big problem for companies that raised a lot of VC funding in the last three years--and for the VCs that funded them. It clearly shows that there are almost no successful exits to pay off the huge ...

If you think you want big VC funding someday with Series A, B, and C funding, then you've got to create one of the few software businesses that will grow crazy fast and exit for over $500 million or $1 billion. This is just how the math works ...

Have you heard that second-time startup founders have an easier time raising funding from VC investors because of their experience? It used to be this way. But I’m seeing more successful second-time founders starting their SaaS companies ...

Optionality is one of the most important words that practical SaaS founders will ever possess. It means you have all of your options open AND the freedom to choose what works for you. When you stay off big funding drugs and grow a profitable ...

Most SaaS startup founders who raised $10M, $20M or more in 2020/21 when VC funding was "cheap and easy" will never win a prize for their startup efforts. Investors knew this was the game when they raced in and paid high prices for cool ...

Two technical founders last week told me they shipped the first version of their new products 10 TIMES FASTER than they did five or seven years ago in their previous SaaS startups--with the same-sized teams. It's because better cloud ...

What if you grew your bootstrapped SaaS company to $5M ARR, but you were still having fun and momentum was building? Would you sell it now or keep going? You enjoy having a leadership team and more employees with a great culture Your ...

From the founders and friends I've heard from in Silicon Valley, the mood is pretty glum there outside of the AI bubble. VCs are dealing with the indigestion of investing in too many companies at crazy valuations that aren't making their ...

I moderated a panel at the SaaStockUSA conference in Austin yesterday with two VC investors and a revenue-based financing (RBF) lender to share what has changed for each of them in the last 18 months. The world of tech finance has changed ...

Back in 2019, after three years of talking to 1500 software founders and documenting ALL the software companies in Phoenix and Dallas on Gregslist, something became obvious to me that was previously hidden. I could see that there were at least ...

Big potential markets don’t always lead to startup success, even with big funding. Some big markets are tough to crack, especially big consumer markets. For twenty years, I watched many entrepreneurs try to solve the “capture your life story ...

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 ...

Four big changes have arrived in the software business in the last five years that didn’t exist 10 or 20 years ago. The cost of making a quality software app has gone down 10X. You can reach your target user and buyer efficiently without ...

I was back in Phoenix last week and I attended two popular events for tech entrepreneurs to connect with potential investors, including the annual Venture Madness event. These venture-pitch events are well-organized and useful, but this year ...

Last week, a friend asked me how many people I know who have made more than $20 million from selling their software company. I thought about it for a minute. Here's what I told her: I know over 200 founders who have made between $20 million ...

The whole SVB crisis this week was about VCs and VC-funded startups. There’s a place and time when VC funding can be a good thing for both software company founders and their big VC investors. But that's the exception. Always has ...

"What are the pros and cons of bootstrapping versus raising outside funding from investors?" That first question by a student struck me as the right question future entrepreneurs should be asking about funding their ventures. I was a guest ...

If you ever choose to raise big money from outside investors for your software company, it’s better to do it much later than early in your startup journey. Later--after you have created a real product, built a team and a culture, established ...

Early-stage software startup investors screen thousands of companies to have hundreds of conversations with founders for every one company they invest in. Here are the most common reasons that startups fall out of investors' sales funnels and ...

When startup founders start raising outside funding, they quickly realize it's a big sales process with a little marketing too. Most founders are surprised to learn that investors have their own marketing and sales processes, but they are 10x ...

I talk to a few people every week who are worried that the software industry is imploding with all the big layoffs. These layoffs and valuation haircuts only affect only a small segment of the software industry. But it looks like "everyone is ...

Two years ago I told software startup founders that almost all early-stage VC investors need to see some revenue "traction" to consider investing. Now, this is even more true. Professional investors and experienced angels rarely invest in ...

Getting startup funding from outside investors just got much harder this year. Bootstrapping with self-funding and then customer-revenue funding is hard too. Pick your poison. They are both hard. Either way, founders shouldn't be making ...

Bootstrapped and lightly-funded SaaS companies looked pretty uncool the last few years when they didn't raise big VC funding. These practical startups are feeling better about themselves now. They aren't at risk of shutting down their ...

Is it ever a good thing for a practical founder to raise a big funding round from a VC? Sometimes under the right conditions, but it doesn't happen very often. You just have to create a valuable and scalable business FIRST, before you raise ...

The practical founders of growing software companies that I talk to every week never took big outside funding. None of them are talking about LAYOFFS right now. It doesn't come up. They are just talking about the usual hard stuff: selling, ...

Gregslist is the curated list of ALL 6000+ software companies in 12 major cities in North America. I started this project 7 years ago in Phoenix. The most surprising stat? There are JUST AS MANY self-funded software companies with over 50 ...

Sometimes I hear from people who have an idea for a software product but no money to fund any initial product development. They don't have savings to invest, profits from a business they own, or friends and family with money to donate. Some ...

I talked to a practicing doctor and a former pharmacy exec this week about their software startups. They asked me about funding options. I used the healthcare industry to describe how I think about funding for software startups these ...

Last week I asked a VC friend how founders should think about taking venture capital investment and when they should not take it. His answer: What's the ROI for founders of taking outside investment from venture investors? If you spend any ...

Yesterday, I asked a venture capital investor this question: "When should a software startup founder not take venture capital investment?" He didn't tell me that every founder needs VC investment. Like all VCs, he knows that venture capital is ...

Three years ago at a tech conference, I heard a SaaS founder on a panel describe how he raised debt to grow their business, not funding with equity. The audience almost gasped when he described how they are happily paying back the loan with ...

When I talk to startup founders who think they want to raise money from investors, I always ask this question: What kind of money are you raising? Most founders don’t know what I am talking about. But this is the most important funding ...

Starting and growing a software company is always hard. Often your company takes over your whole life, at least for a while. Sometimes for a lot longer. Many founders go “all in” and sacrifice all of their time, their health, their families, ...

When a venture capital investor or investor pitch coach gives you advice on your business strategy, here's how practical founders should hear it: "Your company would fit our very specific investment criteria better if you did it like ...

Entrepreneurs place bets every day. But sometimes the odds are not what they seem. Think of all the clapping for startups that raised big rounds of venture capital. “Congratulations on your big VC funding. You’ve made it!” Well, not ...

Bootstrappers are measured by their REVENUES. But VC-funded companies are measured by their VALUATIONS or their latest FUNDING. Isn't it interesting how tech and business media treat companies that didn't raise any outside funding? Valuations ...

I've been raising my voice on LinkedIn for over a year to show how practical founders are successfully creating valuable software companies without big funding. Do you know who isn't arguing with me? The many venture capital and private equity ...

I talk to dozens of entrepreneurs every month who are building a new software product to solve a problem they care about. But I have to take a deep breath when I hear some of them say this: "We are almost done with our MVP. So I'm going to ...

Many founders are struggling to keep their startups alive right now. , because they are spending more than they make and their cash is running out. Maybe they funded it themselves so far, with their time or savings or profits from another ...

I hear from founders every week who pitched big investors and were turned down with responses like these: “Your market is too small” “We don’t like services revenue in the mix with SaaS” “We don’t like transactional revenue" These are ...

A practical founder told me yesterday that he made a bet with a friend many years ago. Who would end up with a bigger prize when they sell their companies someday? His friend had raised big Silicon Valley venture capital, but he had ...

Have you heard investors say, “You can’t make big money unless you raise big money?” They say there is a bigger pie when you raise big VC money, and your founder's share will be even bigger, too. Occasionally, founders actually get a bigger ...

Early-stage Series A and B venture funding were down 22% last quarter and startup seed funding was down 11% from last year's crazy times. This is not a crash for tech startups. It's a modest belt-tightening by early-stage investors. That's ...

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 ...

If you think you want "big VC funding" someday, then you've got to have one of the few businesses that will grow crazy fast and exit at over a billion $. This is just how the math works for the big Silicon Valley-style venture funds we all ...

Public and private software company valuation multiples have come down hard this year, but they are still valued on MULTIPLES OF REVENUE. Here are 5 reasons why SaaS companies are still valued at 10 times revenue on average: 1) RECURRING ...

Here’s the fourth most successful way I see software founders funding their way across the Startup Traction Gap between MVP and sustainable sales. It’s not something I can recommend to new founders, because these startups were funded by ...

Bootstrapped and lightly-funded SaaS companies looked pretty uncool the last few years when they didn't raise big VC funding. These practical startups are looking pretty cool now. They aren't laying off 20%-50% of their people like their ...

When I talk to software venture investors, there is one question that reveals their stage focus 100% of the time. It’s like a law of gravity that can’t be defied. Here’s the question: How big is your fund? If they say $300 million or a ...

Here is the third most successful way I see how software startups get across the Traction Gap from MVP to repeatable revenues. But most new tech founders I talk to think it's the first. Remember, the first and most successful way to cross the ...

I'm looking for a few seed and pre-seed investors who actively invest in B2B SaaS, vertical SaaS, marketplaces, platforms, and consumer apps. I talk to over 500 serious software founders a year. Some of these startups are worthy of (and want) ...

Here's the second most popular way I see founders get across the Traction Gap between MVP and sustainable revenue traction. It may seem obvious, but it's less common than you think. FOUNDER SELLING! This is hard because you have to create ...

I wrote a post last week about the dreaded "startup traction gap" between having a sellable MVP and getting to $50K MRR or some other measure of traction. This is 1st in a series of 4 posts describing how software founders are creatively ...

In the last couple of weeks, I have talked to a dozen startup founders who are stuck between the ideation/starting/MVP stage and the early customers/revenue/growth phase. This is the dreaded Traction Gap. Early-stage investors now tell you to ...

There are many benefits to creating, pitching, refining, and defending your investor pitch deck--then pitching it over and over... Even when you don't successfully raise funding or you aren't trying to raise outside investment at all. Here ...

Founders are often frustrated by inconsistent feedback from investors after a pitch meeting. Too low of a valuation. Or too high. Too much story. Or not enough. Traction means $20K MRR or $1M ARR. Not enough customers. The key metric ...

How much time and effort is required to raise money from outside investors for your early startup? It can take most of the founder's time for six months to a year if your startup has these characteristics: Product not built yet or it's not ...

I think software startup valuations will stay on the high side for the while, compared to 2019 levels. We’re already seeing fewer crazy-high deals, but valuations aren’t dropping off a cliff as a whole. Here's why: Just like anything scarce ...

I heard three software startup investor "pre-pitches" in the last few weeks that all had the same big problem. They were missing the simple startup math story about getting their first customers, creating early revenues, growing up in stages, ...

When investors evaluate a tech startup or growth-stage company, they look at things like the potential market size, your team, traction, customers, and product. But they are really asking one big question about the CEO in charge. Can this ...

I talked to over 10 early-stage software startup founders in the last week about their next funding rounds and all the options. They think growth funding is "getting investment from outside investors," but the first funding option for these ...

Almost 50% of software companies on Gregslist have no outside funding and fewer than 20% are VC-funded. Does that surprise you? There are 5438 software companies on Gregslist.com in 11 cities outside Silicon Valley. 1019 companies are ...

Getting 100% of your startup funding advice from investors is like getting nutrition advice from McDonald's. "Of course, you should supersize it. Everyone's doing it." Investors aren't bad or wrong, it's just that few of them will bring up ...

I talked to 10 startup founders last week who are raising money from investors, have raised, or are planning to raise. I always ask this question: What kind of money are you raising? This is where the fun begins in our discussion. Most ...

VC funding isn't bad. It's just not for most startup software companies. More than half of VC-funded companies wash out completely with no big prize for founders and their employees. I just met Dave Whorton of The Tugboat Group. He has a lot ...

Most startup founders I talk to every week are hearing about the BIG FUNDING game. They are wondering if they should be playing that game too. It's everywhere online with big funding announcements, unicorns, and IPOs. It's what founders and ...

I was talking with a friend today about the over-coverage of venture capital funding in the tech media and at all levels of tech ecosystems. Scott Petty also happens to be a general partner in a successful venture capital fund in Utah. He told ...

In the last 5 months, I have invested in 5 software startups as an angel investor. When I talk to founders about raising money, I always ask this question: "If someone wrote you a $30 million check for your business today, would you take ...

There's an assumption there that "funding" means big VC funding from outside investors. But all startups are funded in some way. They are never not funded. Here are 9 ways startups fund starting up without venture capital or institutional ...

I talked to a savvy software startup founder this week who reached out to me for a mentor call to get my thoughts. He has a big newfangled idea, a first product that mostly works, and a few early pilots with large companies. He has an offer ...

Startup accelerators, incubators, and studios can be helpful for first-time startup founders. But there's a problem with the accelerator business model that is frustrating to a growing number of savvy SaaS founders. More and more software ...

Self-funded software startups can raise outside funding someday if it makes sense. Or not. Or sell it for under $100M. Venture-funded software companies don't have the option to be unfunded at some point. The race is on until you exit for big ...

There are twice as many self-funded companies on Gregslist than companies with VC funding. There are 3 times as many software companies that have "no or very little" equity funding (67%) than have outside institutional VC or PE investment ...

Three founders and two investors used the term "base hits" in the last week when talking with me about founders selling companies for $10M-$50M. Here's why using "base hits" vs "home runs" baseball analogies doesn't work when talking about ...

Most of the big angel investors I know have one thing in common: They bootstrapped and sold their own software businesses. Isn't that ironic? The entrepreneurs who never took any outside investment are the most active angel investors in my ...

A Dallas software founder asked me this on our quarterly call today: "How can our company look serious and credible when we haven't raised a big funding round?" He started his vertical market B2B SaaS business in March of 2020. Now they have ...

Last week I wrote a popular LinkedIn post about how all experienced angel and seed investors need to see some revenues before considering investing in your software startup. I implored software company founders to get customers first and not ...

I have had 13 versions of this conversation in the last 3 weeks with savvy startup founders in Phoenix, Dallas, and Austin. Founder: I'm working on a cool new software startup with a team and we are almost finished with the product. We don't ...

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 ...

There is a lot more startup innovation funded by existing businesses than anyone sees. It just doesn't make the headlines that big funding does. Most of the founders I work with are managing their products and services as a portfolio. It's a ...

In the current tech boom in Silicon Valley, first-time tech founders can raise money from VCs before they have a software product or paying customers. Outside of Silicon Valley, I don't see SaaS founders raising VC-seed investment before they ...

The VC-Industrial Complex dominates the conversation about tech startups. They have convinced new founders to chase outside funding to start their companies and win the SaaS game. They say this because it's their business model. It's how they ...

Overall software tech is booming, especially for the biggest tech companies. In the "almost" post-COVID world, there are winners and losers in early-stage software sectors that full -time early-stage investors follow. Last week I asked 10 ...

When savvy founders with real businesses ask me if they should raise money from investors, my first response is always the same: “Don’t raise money right now. Wait a little longer and gut it out.” I know they desperately need additional cash to ...

Successful startup entrepreneurs almost always have impressive skills in two areas: product creation and sales. They find problems in the marketplace and create products or services that satisfy those needs with teams that can deliver the ...