Early stage funding comes from venture capitalists

Not in this century. In 2012 U.S. VCs invested $26.5 billion into approximately 3,700 companies—an average of around $7.16 million per company. U.S. angel investors put $22.9 billion into 67,030 companies, an average of nearly $342,000 per company. If you’re just starting out, you’re going to be raising a few hundred thousand, not a few million, and your investors are going to be angels, not VCs.

It’s all about the product

It’s all about the people. Investors have learned that products and technologies change fast and now they look to founders first. Great founders can produce great products, middling managers can’t. Lots of companies say it, but for investors in startups it’s true: It really is all about the people.

Investors often say they focus their diligence on the people, the market and the product (in that order). Startup funding is a people business.

Serious investors insist on detailed financial models

Un-serious investors demand detailed projections but no experienced startup investor expects long term financials or puts stock in them when he/she sees them.

In most industries strategic visibility extends, at best, a year or two ahead and startups can’t even see that far. Investors want to see 12-month projections for insight into the company’s market approach; historical financials which show how the company prioritized objectives and allocated scarce resources; and a summary of how you intend to spend the money you raise. Everything else is numerical fantasy.

A great idea is all it takes to get funded

Wrong. Nolan Bushnell, founder of Atari, Chuck E. Cheese’s and 20 other companies, says everyone who’s ever taken a shower has had a good idea: It’s the person who gets out, dries off and does something with that idea who makes a difference. Ideas are easy, execution is hard.

If you want funding from angels or professional investors, you need more than an idea: You need at least a prototype.

Closing an angel round takes long negotiation

Serious investors are busy people and they gain nothing from extensive meetings and drawn out negotiations. Beware angels who want still more meetings over coffee.