I wrote a chapter in the recently released book The Entrepreneurial Effect (available at www.commonerspublishing.com ). The book is a collection of experiences from successful entrepreneurs and the intent is to provide a road map for the next generation. In my chapter I cautioned software entrepreneurs to take Venture Capital only when they absolutely had to. The cost of getting and managing the investment is so huge that it often isnt worth it. Moreover, when that sought after exit finally happens, founders of software companies are often disappointed at what goes into their personal bank accounts after debentures, pref shares, liquidity preferences, etc., are paid to the institutional investors.
We in the software business have the unique ability to boot strap a company on the strength of our sales the least dilutive cash you will ever get. Some friends and family investors, a focus on sales and lots of Kraft Dinner early on in your development can make for a great pay day when that day comes.