Very few (and I mean less than 1%) of new startups take on funding to get started.  There is an old myth that you have a great idea, write a business plan, and some investor writes you a check to help you see if it works.

The reality is that most startups fund themselves by bootstrapping it.

You raise capital for a handful of reasons - to hire people, do some marketing, and develop your product.  Yet you don't necessarily need a stack of cash from an investor to do these things.

Here's how startups tackle each issue without taking investor's money:

People.  People are the most expensive resources and yet the one resource that you can potentially get for nothing at all.  Smart entrepreneurs recruit people who are willing to work for equity or stock options in exchange for their time.  In some cases deferred compensation ("I'll pay you when we get paid") works as well. 

Here's a blog post about hiring people who will work for equity.

Marketing. Companies like Procter and Gamble can spend millions of dollars to launch a new product and not bat an eyelash.  You're not P&G and probably never will be (nor will just about anyone else, statistically speaking.) 

Entrepreneurs with new ideas do their marketing incrementally, starting with stuff that doesn't cost money, like word of mouth, on-line marketing, and direct sales to customers.  It would be nice if we all had millions of dollars to introduce a new product, but it's rarely an option.  You need to exhaust all of your free options before you even consider taking on capital.

Production.  Many entrepreneurs think like this: "If I had $500,000 I could do a production run of my product and then start selling it with confidence."  That's not going to happen.  No one is going to give you $500k in hopes that you might sell all of your inventory and make a buck.

Instead, you need to figure out how to get one unit made, the prototype, and begin landing pre-orders from potential customers based on that prototype.  Does that sound really hard?  It is.  That's why not everyone is starting a company. 

If you really want to show investors that you know how to start up a company, prove to them how much you can do before you ever ask for money.  Investors want to find entrepreneurs that are willing to struggle and are very creative.  Anyone can take a check and spend money.