Capital is essential for growth and can be the lifestream of any successful business. But not every option is a fit for every company. To help dispel certain funding myths, we chatted with experts in banking, venture capital and non-profits in a recent hangout moderated by our editorial director Ray Hennessey. Here’s what they had to say:
Myth #1: You must raise money. Our experts advise new companies to think carefully about how they fund their companies, especially in the early stages. For instance, with venture money, entrepreneurs can lose some control over their business and be forced to shift their timeframe for success. “You’re cutting a deal that has some downsides,” says Seth Levine, managing director at venture capital firm Foundry Group. They suggest you ask yourself whether you can get funding from other sources, such as bootstrapping, pre-selling or even revenue.
Myth #2: Successful companies are funded companies. Since monies raised is a clear, measurable milestone, it can be easy to equate success with funding, says Marc Nager, CEO of entrepreneurship nonprofit UpGlobal, but don’t succomb to default thinking. Our experts remind entrepreneurs that most companies don’t take institutional investment and that you shouldn’t define your company’s success through raised dollars.
Myth #3: Banks aren’t interested in startups. New business owners shouldn’t neglect traditional financing options and should remember to tap banks’ expertise. “That old saying of ‘debt is cheaper than equity’ certainly holds true,” says Wole Coaxum, a business banking executive at Chase, “People should at least have a conversation with their bank to see what’s possible.”
This article is editorial content and reflects the personal views and opinions of the participants.