Published on June 20th, 2017 | by Jose Vasquez0
The 5 Biggest Misconceptions About Funding in Startup Tech Companies
Most startups need initial funding to get started, but too many entrepreneurs don’t understand the basics.
Without funding, it’s nearly impossible to get a startup off the ground. Sure, there are several business models you can initiate with just a few hundred dollars, but if you want to expand and compete with major players, you’ll need a bigger injection of capital.
Unfortunately, many of the entrepreneurs I’ve met carry strong misconceptions about what funding is, how it works, and what the best way to pursue it is. These are some of the most common misconceptions I see:
- Crowdfunding is a sure bet. With all the successful projects that have been crowdfunded over the years, it may seem like any crowdfunding campaign with a decent video and suitable rewards will succeed. The reality is that it takes tons of work (and a little luck) to be successful, and most crowdfunding projects end up short of their goal.
- Angel investors have no downsides. The term “angel investing” makes it sound like the money is a gift, but that’s not the case. Angel investors want to make money, and they contribute capital in exchange for partial ownership in your company. That means they’re going to be involved in all major decisions, whether you like it or not.
- Venture capital can guarantee success. VC is somewhat hard to come by, so if you’re successful in raising some, you might believe you’re on the fast track to success. However, VC is just the first step; you still need to put the work in to make your business thrive.
- There are only a handful of funding options. So far I’ve listed crowdfunding, angel investors, and VC, but there are limitless opportunities to fund your business, including through grants and loans.
- Successful funding depends on an idea alone. You might believe that the strength of your idea is what determines whether or not you receive funding, but there are dozens of other factors at play, including your personal experience, the team you have on board, your timing, and the state of the market.
If you can tackle these misconceptions proactively, and learn more about funding in general, you’ll stand a far better chance of getting the capital you need to succeed.