The whole 1% of $100M versus 10% of $10M calculation vastly oversimplifies the outcome of these companies as binary. This is totally wrong.
In my experience in silicon valley, people start with building something small/simple (but in a big market), get little drips of funding from investors as they show progress. If they fail at any point along the way, there's value in what they've created, and they exit for whatever they get. The later you exit, typically the further along you get, and the bigger the exit. That's why the diversity of outcomes in the valley are everything from zero to billions, and companies raise anywhere from zero to a dozen rounds of funding.
At any inflection point in the business, you have lots of options: you can sell, raise more money, raise more and cash out some shares, you can quit, you can make yourself chairman and have your cofoudner run it, you can do nothing and grow it organically, etc., etc.
Each one of the choices above are part of your arsenal of options at almost any point. The people who choose to raise tons of money, not cash out at all, and then who fail- well, they made a series of active decisions to do all of that. They're big boys.
My point is, when you're building a company you can make a lot of choices along the way, and it's not just setting out for a suicide run of either 1% of $100M or 10% of $10M. Choosing to raise outside financing is sort of like deciding whether or not you want a cofounder (or 2, or 3) - it just another form of business partner. You get less %, but hopefully they add to the business in a meaningful way that leaves you better off.
At any inflection point in the business, you have lots of options: you can sell, raise more money, raise more and cash out some shares, you can quit, you can make yourself chairman and have your cofoudner run it, you can do nothing and grow it organically, etc., etc.
Ah, but this is only true for bootstrapped companies or very early stage companies with little funding. Once you raise a Series A or B, your options are basically to grow as fast as possible or get fired and replaced by someone who will.
And this narrowing of options and loss of control is another thing I dislike. A successful bootstrapped company can always go raise money at great terms. But once you do, you can't go back.
To be clear, I'm not blaming investors or saying anyone is being cheated. But I do think that many young, naive, overly-optimistic people end up taking a path they wouldn't take if they saw the world a little more realistically. It's the same situation with early startup employees, who almost always get shafted.
That also depends on the terms of your funding. It's your choice to give up board control; you can negotiate for a majority voting stake, but you have to have negotiating leverage. Zuckerburg not only kept sole control of his company, he also took cash off the table, so even if Facebook tanked in 2006 he would still end up a millionaire.
In my experience in silicon valley, people start with building something small/simple (but in a big market), get little drips of funding from investors as they show progress. If they fail at any point along the way, there's value in what they've created, and they exit for whatever they get. The later you exit, typically the further along you get, and the bigger the exit. That's why the diversity of outcomes in the valley are everything from zero to billions, and companies raise anywhere from zero to a dozen rounds of funding.
At any inflection point in the business, you have lots of options: you can sell, raise more money, raise more and cash out some shares, you can quit, you can make yourself chairman and have your cofoudner run it, you can do nothing and grow it organically, etc., etc.
Each one of the choices above are part of your arsenal of options at almost any point. The people who choose to raise tons of money, not cash out at all, and then who fail- well, they made a series of active decisions to do all of that. They're big boys.
My point is, when you're building a company you can make a lot of choices along the way, and it's not just setting out for a suicide run of either 1% of $100M or 10% of $10M. Choosing to raise outside financing is sort of like deciding whether or not you want a cofounder (or 2, or 3) - it just another form of business partner. You get less %, but hopefully they add to the business in a meaningful way that leaves you better off.