SaaStr · 2015-09-30
· 3899d
Should Wealthy Founders Self-Fund or Raise Institutional Capital?
Jason Lemkin addresses whether entrepreneurs with substantial personal wealth ($40MM+) should self-fund their startups or raise institutional capital ($12MM+). The analysis suggests most founders are risk-averse and prefer to invest only 10-30% of personal savings while maintaining dry powder, with institutional capital enabling larger follow-on funding rounds.
Metrics in this report
Multi-Round Capital Requirement Multiplier
2x
approximate
ratio of cumulative funding to single round size across follow-on rounds
Personal Capital Deployment Ratio
10-30%
typical range
percentage of personal savings founders invest in their own startup
Personal Liquid Assets
40$MM
example
wealthy entrepreneur baseline in scenario
Self-Funding Threshold
1-2$MM
recommended maximum
capital level below which self-funding is preferable to institutional raises
Single Round Capital Raise
12$MM
example
institutional funding round for established founder scenario