Melinda French Gates refuses to give her daughter, 22, money for her shopping business — despite $31 billion net worth. Do you agree with her reason?

“I wouldn’t put money into it,” Gates told host Amanda Davies at the *Power of Women’s Sports Summit presented by e.l.f. Beauty in London.

By holding back her financial support, Gates says her daughter gets the chance to test and validate the business idea with real investors and customers. If it’s a “real business,” Gates says, the venture will eventually find people willing to back it.

Phia has already attracted outside capital. According to GeekWire, the startup has raised $850,000, including $100,000 from Soma Capital, a $250,000 Stanford social entrepreneurship grant and $500,000 from angel investors such as Kris Jenner and Desiree Gruber.

Phoebe Gates and her co-founder, Sophia Kianni, have also secured a podcast deal to promote the venture. Her journey offers some valuable lessons for anyone looking to start a business.

Look for real-world traction

Despite the flashy headlines, most startups fail. Roughly 90% eventually collapse, according to the Founders Forum Group, with 42% failing because they couldn’t meet market demand.

In other words, the odds are stacked against you, and the most common pitfall is building something nobody wants to pay for.

To avoid this trap, try to find relatively cheap and quick ways to validate your business idea. Pitch the idea to angel investors or industry experts to see if they would bet real money on the venture’s success.

Better yet, look for paying customers to validate your business idea before you sink too much of your own money into it.

Customers are the best source of funding

According to the Small Business Administration, about 14% of small business owners relied on friends and family for funding in 2023.