The Inc. 500 list came out last week, and we were proud to again make the list. We also were pleased to see that Avondale was in the vast majority of Inc. 500 companies that financed their growth through personal savings and cash flow. You might be somewhat surprised, in this era of venture capital, angel investing, and crowd funding, that many of the fastest-growing companies didn't raise a single cent from outside sources.

Every year, Inc. surveys the CEOs of the Inc. 500. Here's what they said about funding their growth:

  • 77% of companies founded the company using their personal savings
  • 74% of companies funded their growth over the past three years largely through cash flow from operations
  • 42% of CEOs said they have no need for outside funding going forward
  • Only 34% claimed that access to capital has been essential to our growth

This seems to fly in the face of the popular belief that successful companies require venture capital to fuel their growth. In fact, some entrepreneurs we talk to seem to believe that getting funding is a necessary validation of their business model. While that might be the case, these statistics show that outside funding is not necessary to create a high-growth business.

Here's what we take away from the Inc. statistics:

  1. Successful entrepreneurs have shown they can create value from a relatively small amount of start-up capital by focusing on the needs of their customers and serving them in a way that uses "customer capital," or capital that comes from selling something to a customer.
  2. Self-funding does not equal slower growth. If that were the case, the majority of the Inc. 500 would be venture-backed companies. The fact that most were self-funded suggests these companies grew faster than many others that used outside capital to fuel their growth.
  3. It's possible that self-funded companies actually obtain some advantage over those receiving outside capital. There's no doubt that many companies that receive venture funding are successful, but there also are significant benefits to be gained from bootstrapping. Maybe entrepreneurs and companies that are self-funded are more prudent about taking on risks and achieve better or more lasting results. These data are not sufficient to say.
  4. Growing through self-funding is preferable to bringing in outside investors.  Given the downside of raising external capital, such as ownership dilution, loss of control, and management team distraction, entrepreneurs should only look to outside investors as a last resort.  In the case where self-funding is a viable option, the benefits of outside capital don't outweigh the costs.

Too many start-up entrepreneurs look to outside capital first rather than attempting to build incrementally with internal sources. It's nice to see that many CEOs have been successful pursuing growth within their means.

What are your takeaways from the data on funding for growth companies? Share your thoughts with us at