Fundraising can be a tricky business, with many factors influencing the outcome. Avoid these funding myths and make sure you have the information and strategies you need to keep your company thriving.
Myth: Funding is synonomous with success.
Reality: Not every successful company seeks funds and not every company that does becomes successful in the long term. Don’t look for outside dollars because you think it’s impressive or could get you press attention. Funds from VCs or angel investors often come with management strings and pressure to perform. Ask yourself if you need money at all and if you’ve exhausted bootstrapping, loans from banks, friends or family, or even funding through revenue.
Read more: Every Business Must Raise Funding and Other Startup Myths
Myth: Funding will put my company on solid ground.
Reality: You could get a minute to breathe, but not much more time after that. The investors who are betting on your business will want to make sure their money is being put to good use. You’ll be put on a timetable for growth, possibly before you have a market or know your company’s true niche. If you seek funding too early, and can’t get momentum, it could impact your future prospects with investors.
Read more: The Truth About Getting Funded
Myth: Investors have my company’s best interests in mind.
Reality: Investors aren’t always mentors. It's true, some can provide valuable guidance, but be aware that many are merely looking for returns or to expand their portfolios. The decisions you make to create a great exit for your investors might be very different from the decisions you’d make to build your company if the money came without strings.
Read more: The Hard Truth: Even If Your Company Fails, Angel Investors Still Win
Myth: I'll just get a loan.
Reality: Business loans can be hard to come by for new entrepreneurs without a track record. Loans can be a smart way to keep cash flow moving and are even a defensive move against the unexpected, but they can’t replace revenue in the long term. Be conservative and don’t take out more than you need.
Read more: The 3 Principle Sources of Funding Every Startup Needs
Read more: Financing Face-Off: Debt vs. Equity