Startup Funding: Debunking the Top Myths for Good

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The startup world is one of the most interesting around. It’s full of exciting stories, dramatic failures, and over recent times it really has exploded into the mainstream news. The development of online businesses has undoubtedly facilitated this and made startups a little more relatable to the Average Joe who has perhaps always been harboring hopes of starting a business.

However, in and amongst the success and horror stories are some dubious myths. This is an area of business where a lot of inaccurate information is published, and through the course of this guide we will look at some of the biggest misconceptions that arise from one of the most important areas of startups: funding.

Myth #1 – You only need $100 to start

If you delve through the archives you will be sure to find some stories of people in business who claimed to have $100 in their bank account, and went on to make a multi-million dollar establishment. Can it happen? Sure. Does it happen regularly? Not at all.

It would be fair to say that starting a business has become easier than ever before. The fact that some initial costs that were historically large, like EMV terminals, have crashed down in price means that some early obstacles no longer exist. However, at least some capital is needed, whether this is for product development or marketing to get the product out there. Very few businesses will start with the stereotypical $100.

Myth #2 – When you do need finance, it’s a bank loan or nothing

This is actually rarely the case nowadays. Startups are lacking collateral, and this is one of the key ingredients that banks look out for. As such, if a startup does go down the bank lending route, the only way they are likely to receive this is through a personal loan. Suffice to say, a lot of startups don’t want to take such a risk to their personal property.

The situation has turned somewhat recently thanks to crowdfunding as well. Some startups will give away equity, or a product, in a return from funding from “the community”. It again means that banks are often redundant during the funding process.

Myth 3 – With a business plan, any funding is possible

Another misconception is that anything is possible courtesy of a business plan. To suggest that this is a golden ticket is a complete misconception though. While banks can look at them favorably, other sources of finance don’t believe in them and will never turn to them.

Bearing this in mind, placing all of your eggs in this basket is not a guarantee that you are going to net that elusive funding. Particularly in the modern-day crowdfunding world, this is something that is becoming less used (although for your own benefits, funding aside, they can still be a useful document to have). As such, don’t put one together and think that a magic wad of notes is going to come your way.

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