10 Reasons for a Startup to Skip Outside Investors

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I’ve always wondered who started the urban myth that the best way to start a company is to come up with a great idea and then find some professional investors to give you a pot of money to build a company. In my experience, that’s actually the worst way to start, for reasons that I will outline here, and also the least common way, according to a recent survey of new startups.

Based on the latest Start Up Environment Index from the Kauffman Foundation and LegalZoom, personal money, or bootstrapping, continued to be the primary start up funding in 2012. 80% of new entrepreneurs used this approach, with only 6% using investor funding. The remaining entrepreneurs borrowed from family and friends or acquired a loan.

So before you become obsessed with scoring investors to fund your idea and minimize your risk, consider the following:

Finding investors takes work, time and money you can ill afford. Entrepreneurs who plan to complete a business plan the first month, find an investor the second, and roll out a product the third month are just kidding themselves. Count on several months of effort and costly assistance to court investors with less than a 10% success rate.

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