Based on what we see in the newspapers, and what we hear on TV, most businesses must be funded by venture capitalists with lots of money, right? Wrong.

So if doesn't come from the guys with the fat wallets, where does it come from?

Survey after survey has shown that most of it comes from you and your partners.  In fact, an Inc 500 survey from a few years back found that 87% of the Inc 500 businesses were funded through personal assets. The same study also showed that roughly 30% of business owners get money from their cofounders.

So after your pockets and those of your partners are empty, what next? Most people turn to their family and friends, or where 20% of this class received some money. Often getting friends and family is a recommended approach before going to "big money" because you prepare yourself and the business to appear more attractive. So think of the friends and family as a practice round, in addition to a great source of support and financial encouragement.

The big surprise in this report, one I use to get people's attention when I'm talking about funding startup companies, only 2% of Inc 500 companies received funding from venture capitalists. 

That 2% seems low, but maybe you say to yourself, "I'm going to be that guy that gets that 1 out of 50 chance." Maybe so.  But remember that  those surveyed were Inc 500 companies.  Inc 500 is like the Fortune 500 of the small business world. Inc 500 is the Who's Who of entrepreneurs. The Inc 500 companies have an operating business, a very successful one, one that is bringing in at least hundreds of thousands of dollars in revenue. Saying that 2% of the Inc 500 get VC money is like saying that there is only a 0.2% chance that you or I (the fledgling inventors with no business, no revenue) will get a dime from VCs.

The reason our perception does not equate to reality is because we only hear about the big guys in the news. Many (but not most) of the big successful companies may have received funding from VCs. We never hear about the hundreds of thousands of small business startups and inventors funding their own business. Whatever our perception, we must face reality in the end. 

The smart inventor, like you, will then realize after reading this article that the someone you've entrusted your life to - you - is going to have to pull you through this. You are the man (or wo-man)! You will be financing this thing from the ground up. You will be smart enough to get some support from co-founders, family members, and friends, long enough to build a business that has sales. Once you have sales, the sales revenue gets put back into the company, and money starts flowing back into your pocket. Now doesn't that feel better?  

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