Myths About Financing That Hurt Entrepreneurs
Small Business Trends:
Most entrepreneurs believe a bunch of myths about financing new companies that hinder their efforts to raise money. Here are a few:
Myth 1: It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going.
Myth 2: Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81% of all venture capital dollars, and 72% of the companies that got VC money over the past 15 or so years.
Myth 3: Most business angels are rich. If rich means being an accredited investor – a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is ‘no’.
Myth 4: Start-ups can’t be financed with debt. Actually, debt is more common than equity.
Myth 5: Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for 16% of all the financing provided to companies that are 2 years old or younger.
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