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he reality of funding is that very few startups receive any funding from Angel investors or venture capitalists.\u00a0Each year, over 500,000 companies are started in the United States. Of these, venture capitalists invest in fewer than 1,000 per year, plus Angels and Angel Group in roughly another 30,000 startups.<\/p>\n
What these numbers tell us is that, at most, only six percent of all startups receive any funding from these sources. The deeper reality is that the actual numbers are probably even lower.<\/p>\n
Why lower? Most \u201cventure-backed\u201d startups have previously been funded by Angels, and most Angel-backed startups receive investments from multiple Angel groups, all of which causes some double-counting in these statistics. Thus, the true odds of any startup being funded by Angels or VCs is likely closer to three percent than six.<\/p>\n
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This is certainly not how it seems from reading the newspaper or startup blogs. Or from listening to the frenzy of entrepreneurs, who expect that funding is available for every entrepreneur who asks for it.<\/p>\n
So don\u2019t start your companies with an expectation that such funding will follow. The odds are against you.<\/p>\n
Instead, go back to the first statistic, noting that the vast majority of the 500,000 startups manage to get up and running without any Angel or venture capital funding, using savings, friends and family, and little else in terms of funding.<\/p>\n
That big number includes all the corner stores, landscaping companies, dry cleaners, supermarkets, etc., plus the myriad consultants, accountants, and other independent contractors who incorporate their businesses. Such companies allow the owner and employees to earn a living but usually do not make a fortune.<\/p>\n
Those companies are the majority, not the exception. The exceptions are the startups that are funded by Angels and VCs. The exceptions turn $1 million into $100 million. That is the reason why companies that raise money are covered by the newspapers, magazines, and blogs. Those deals are rare and, thus, news!<\/p>\n
So what is different about the 20,000-30,000 startups that are funded by Angels and venture capitalists? Why do they receive funding while hundreds of thousands of others do not?<\/p>\n
The reality is that successful funding\u00a0often comes down to networking.\u00a0Interpersonal connections have more influence than the quality of the investment opportunity or terms of the deal.<\/p>\n
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