It is commonly believed that venture capitals are the main drivers of entrepreneurial success. Unlike common belief, almost 90% of startups are funded through savings, friends and family. The Kauffman Firm Survey shows that 4.4% of startup funding came from venture capitals while angel investors provided 5.8% of the funds. One would think that it can be understandable that entrepreneurs are likely to fund their own start but wouldn’t be able to grow without a VC or angel. The survey shows otherwise. When they studied 479 Inc. 5000 companies, they found that the numbers went slightly up. Only 6.5 and 7.7 percent of growth funds came from VCs and angels, respectively. It turns out, high growth companies use savings, family and friends as their main source of funding. For companies going public, the involvement of VCs increases significantly to 37% though still lower than what we may expect.
Despite their limited startup involvement, ventures funded by VCs make up a large portion of high growth companies. Consequently, the funded companies make a significant impact on the economy in terms of job creation and innovation.