Software companies & outside capital

Yesterday I read a very interesting and bold article on Sara Blakely: Youngest Self-made Woman To Join the Billionaires Club. One paragraph struck me immediately…

Today Spanx is to slimming undergarments what Kleenex is to tissues: A brand that stands for the category. It nets an estimated 20 percent on revenue just south of $250 million. In recent months four Wall Street investment banks separately valued Spanx at an average $1 billion, a sum Forbes corroborated with the help of industry analysts. Blakely owns 100 percent of the private company, has zero debt, has never taken outside investment and hasn’t spent a nickel on advertising. At 41, she’s the youngest woman to join this year’s Forbes’ World’s Billionaires list without help from a husband or an inheritance. She is part of a tiny, elite club of American women worth ten figures on their own, including Oprah Winfrey and Meg Whitman.

If this company (that manufactures products) didn’t need outside capital then b2b software companies can easily grow organically without any external capital. With software companies:

  • you develop the product once
  • you can sell it n number of times (since it is intangible)
  • you don’t need a warehouse or any overheads of a brick and mortar business
  • you can host it inexpensively
  • you can sell it online without having a sales team
  • you can keep your team under 5 people per product (this might be a high number)
  • you can use other SaaS tools to keep your costs low