Sam Parr, founder of The Hustle and co-host of My First Million podcast, shares insights about the realities of venture capital, founder ownership, and the path to personal wealth for entrepreneurs.
This conversation reveals important perspectives on bootstrapping versus taking VC funding.
Table of Contents
Transcript
Sam Parr: My friend sold his startup for $1b and only cleared $3m (pre-tax).
Me: What?!? How???
Sam: He raised $400m of VC from Seed to Series E and had 4 co-founders. 1.2% total founder ownership after employee options.
Me: And he didn’t take any secondary?
Sam: Nothing meaningful. He didn’t have the leverage.
Me: That sucks.
Sam: Tell me about it.
Me: You talk to TONS of wealthy entrepreneurs about how they did it. How do you avoid having this happen to you?
Sam: The problem with VC is that you are signing up to ultimately own 10% or less of something that has a 70% or greater chance of failing. If you just don’t raise, or raise as little as possible, the odds that you will have something smaller, own most or all of it, that has a much higher chance of succeeding… and be wealthy… are much higher.
Me: Have you ever taken VC?
Sam: Nobody would invest in The Hustle, which felt horrible at the time, but ended up being incredible for me personally. I sold it for more than what you see on the internet (which is high 20mm’s FWIW), bought the S&P index with the money (which is up 45% since I sold), and didn’t have to give anything to any investors. So I look like a genius compared to my $3m friend.
Me: Would you take VC now?
Sam: Now I would use VC money, but I’m post liquidity. I would want to really try for something big, and it wouldn’t really crush me if I wasted a decade on something that failed. Pre-liquidity it would have.
Me: What does “post-liquidity” mean?
Sam: I asked a bunch of wealthy friends how much money they spent. One guy who I really respected said $600k. I divided that by 3%, and it gave me $20m. After The Hustle, I cleared $20m and then some. So, that, for me, is “post-liquidity”.
Me: So you think no VC until post-liquidity?
Sam: Some businesses absolutely require VC. I invested in a robotics company that used a TON of capital and made the founder a billionaire. But, in general, if you want to get wealthy, use little or no investor money.
Me: Fair. One more thing.
Sam: What’s that?
Me: Asking for a friend… How does someone who bootstrapped $25m ARR and is going to do $14m in profit this year get on My First Million?
Sam (smiling): Email me … and come up with the angle!
Conclusion
This conversation highlights a crucial insight for entrepreneurs: while venture capital can fuel rapid growth, it often dramatically dilutes founder ownership.
For many founders, bootstrapping may offer a more reliable path to personal wealth, with Sam’s experience selling The Hustle serving as a compelling example of maintaining ownership while achieving significant financial success.