Categories: GlossaryStarting Up

The Idea of Seed Funding

What came first? The chicken or the egg? This dilemma remains unsolved, and it seems like no one ever will find a real and indisputable answer. When it comes to plants, on the other hand, there are no questions about their origin – everyone is aware of the fact that, whether you want to have a beautiful apple tree, or delicious vegetables in your garden, you need to have seeds and plant them in the soil. In contrast to the egg dilemma, we all know and feel that the seed was first and it begins a plant’s life.

When To Start Seed Funding?

This is the earliest funding that you may be able to attract into your startup. Very often, startup founders whose initial capital is obtained from seed funding offer their investors an equity stake in the enterprise in exchange – albeit with less formal contractual overhead than standard equity financing. So, what does a starting entrepreneur need to know when he fights for funds and a better business future?

Banks and venture capital investors consider seed money as a high-risk investment – it is common for them to wait until a business is more established before making larger investments in venture capital funding. When they decide to invest, they typically provide money for market research, product development, prototype production or other early-stage operations. How much money a company can reach regarding seed funding depends entirely on the business founders. The business owner’s skills, business capabilities and track record, along with the product’s or service’s benefits, help determine how much seed capital investors may contribute. The brilliant product or idea may not be enough in this case – here you may have to prove that you’ve created something people desire and something that can fill the gap between the customers’ needs and satisfaction on the market.

How Can You Convince Investors?

It’s not a mystery that, these days, business beginners don’t need so much money to start running a project or entrepreneurship. It is because the cost of building startups has gone down, comparing it to the expenses of starting a business in the past. Present-day entrepreneurs have a hard nut to crack, regarding finding seed capital, because investors expect to see a lot more validation and traction even at the seed stage.
To reach success, you need to create a perfect pitch, be ready to answer all the questions, show that you know everything about your idea and that you’re convinced that your project is worth investing. Below are some steps that may help a beginning entrepreneur to raise seed capital:

1) Try to validate your idea without any financing – you’ll get to know your product better and it will be easier to convince investors.

2) Try to get paying customers before approaching seed investors – you’ll show that people desire your product and are ready to go for it!

3) Bootstrap during that period – you’ll indicate that the most important thing for you is your project development.

4) Get introduced to seed investors with a clean set of proof points – let them know that you’ve examined your product and you know everything about it.

5) Pitch with a well-articulated slide deck that answers all possible questions – be prepared for every question and know everything about your product.

As you can see, there is a lot to be done, even at the beginning, but if you know that your project is perfect and worth backing, you’ll gain success. Good luck!

Emilia Pluta

Traveler, business psychology student, and analog photography enthusiast. Crazy about Southeast Asia and everything that comes from this part of the world, especially smiling people and food. Planning to go on a trip around the world in more than 80 days, to have enough time to feel the smells, tastes and talk to as many people as it’s possible. Dreaming of doing both – writing and lying under the palm tree in the future.

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Emilia Pluta

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