

Myths about Financing Start-ups that Hurt Entrepreneurs - newacc
http://smallbiztrends.com/2008/01/five-myths-about-financing-start-ups-that-hurt-entrepreneurs.html

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old-gregg
The piece is written completely in reverse, spreading popular myths as opposed
to debunking them. Actually it _does_ take a lot of money to start a new
business. True, an "average startup" probably "gets going" on 25K or less, but
you don't want to head where average startups usually go (oblivion).

And just for the record, 25K is about 3 months of modest living for a team of
3 in SF/NYC/Boston. Then you should start generating ~20K/month of revenue to
support yourself. Zero to 20K in 3 months? Good luck with that.

An "average" _successful_ startup goes through several rounds of funding, just
look at some recent exits and see how many of them took 25K or less.

About bank financing: the "myth" is true. You won't use it. Banks always tie
their loans to either solid revenue history or personal obligations of the
founders. It won't be any different from taking a home equity, don't do it.

Tech startups aren't restaurants: they have zero revenue for the first 1..3
years. That's why looking at federal reserve stats for small businesses is
pointless. Getting a loan to run a roofing business isn't the same as getting
a loan to sit and code for a year.

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idlewords
> 25K is about 3 months of modest living for a team of 3 in SF/NYC/Boston

An excellent reason not to do a startup in one of those cities. They are
expensive to live in and full of tempting and expensive distractions. If
you're serious about bootstrapping a web startup and can choose where you
live, then living in an unglamorous place with a great net connection is one
of the easiest ways to stretch the time you have before funds run out.

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weaksauce
That is true. That will definitely get you more time to build your app. What
you lose out on is the connections to the people that being in a startup hub
will get you. Those connections are king for getting talent to help you build
and scale your app. The other thing those connections can get you is face time
with the media to actually market the app.

None of the above items are _essential_ to building a successful internet
startup, but like most things in life there are tradeoffs.

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alain94040
Not impressed by this article, unless by "startup" you mean "pizza parlor".
The stats are bogus and misleading.

Ok, so if I was in bad a mood, I'd make fun of this professor of
entrepreneurship, who never enterprised anything? Pontificating about startups
from a cushy desk job is one thing. Actually doing it and speaking from
experience is another entirely. Sorry about the rant.

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salvadors
Do more than 1 in 4000 people _really_ die from falling in the shower?

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lsb
Showers or tubs are pretty dangerous, but not for the 18-35 demographic.

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stanleydrew
I also thought that was kind of misleading. Probably more than 1/4000 people
who die are killed in the shower, but that's not really a relevant comparison.
When people get old they probably die in the shower fairly regularly. There
was definitely an implication that the probability of getting vc money for
your startup is less than the probability of you dying in the shower, say,
tomorrow.

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hymanroth
He mentions debt but not security. Most banks won't finance a pre-revenue
company without personal guarantees. And if you end-up borrowing against your
own assets, you're basically financing yourself.

