A couple weeks ago I was reading a post on SmallBizTrends.com titled “The Keys to Small Business Success” by Rieva Lesonsky. She mentioned a study by the Kauffman Foundation that had interviewed 594 founders of successful businesses. Most of the statistics were not surprising, except for this one.
“68 percent said availability of financing/capital was important, but only 11 percent had received venture capital, and just 9 percent had obtained private/angel financing.”
This statistic stood out to me because it represents a disconnect in what the founders said (availabity of financing/capital was important) and what they actually experienced (only 11% took VC and just 9% took private financing). How can it be that important if so few of them actually needed it?
Financing as a Security Blanket
My opinion (and I welcome your opinions in the comments below) is that financing acts as a security blanket for many entrepreneurs; especially VC and angel financing. They want to spread out the financial risk so that if the ship sinks, at least someone else is keeping them company. They think that initially, but once they start taking steps they realize that it isn’t so bad. They can handle it and so we see 68% who SAY it’s important and then only 20% took VC or private financing. The remaining 48% figured out a way to make do. And that is why entrepreneurs are the key to the economic recovery. They find ways to make good things happen. Some of them just want to feel like they have a safety net.
About Robert
I suspect that a large portion of that 48% would have taken the funding if it had been available to them. The reality is that there are far more deals chasing fewer dollars.
I do agree that funding can be a security blanket, but in some fast-moving industries raising money can accelerate development and marketing which can make a difference in surviving and thriving.
Alternatively they may have had the financing available through their own capital whether from savings or previous businesses it allowed them to not have to worry about accepting VC or angel funds.