Just a few decades ago, if you wanted to start a business you needed to have a savvy business plan, a rich network of people pulling for the business idea and yes, investors. Investors are people that put money into the enterprise before it is anything but an idea, and continue to fund it when it is off the ground. Businesses just did not get off the ground without funding to either purchase equipment, obtain the personnel before they are needed and have adequate marketing budget to compete or inform the public about the product or service.
Recently, the last 10 years, I have seen most people that decide to start a business, try to do so without a business plan, without investors and a HomeDepot-esque do-it-yourself attitude. The statistics are in favor of those that are funded.
According to the U.S. Small Business Administration, self-funded businesses have a 60% chance of failure or a 40% chance of succeeding. As one might expect, businesses that are venture backed are the exact opposite in terms of success and failure. Of those businesses backed by investors, 40% will fail and 60% will succeed.
Aspiring business owners can generally pull together the funds from their savings and friend and family for computers, that first office, and software or that web/mobile app that they are going to use for revenue generation. The thing that is chronically forgotten and unfunded is marketing. How do you get your idea out there? One trade show and a website isn’t generally enough to fill the bank account. It takes a strategy and sustained multi-channel marketing effort to get a business moving. Having investors along for the ride keeps it moving.
Think about a rocket on the launch pad. It is idle until ignition and if it is under fueled it might get off the launch pad, but will tilt and fall at the hands of gravity without sustained and enough fuel. The same is true of any start up, marketing and talent are the fuel for ignition, and more importantly sustained momentum.
Starting a business is supposed to be a bit scary and requires a commitment to succeeding. It also helps to have a healthy respect for failure. Making sure you have the right tools to get off the launch pad, or the ever important investors for your “next Facebook” web/mobile app idea, and you’ll increase your chances of success.