Starting your own business can altogether change your life completely; however, it’s not an easy task as it takes a lot of courage, energy, and willpower. To add to it, a well-defined vision is what every leader needs to have to cross the finish line. Secondly, a start-up needs to envisage how to monetize from the very beginning, as the initial investment counts, particularly for potential investors. Also, one of the biggest myths about starting a business is to think that you can do it alone, but the truth is you cannot build and manage a great business without help, as it’s not a one-man army staff and you’d need your own staff at some point in time. Your staff is the team that’d work with you on a daily basis to help build your business. They will help you draw a marketing strategy that will make you know the direction your business should be in. No idea is 100% full proof and an investor always depends on his gut feeling to decide whether to invest in a venture or not. The total amount an investor would like to invest also depends on a thorough assessment based on the available data he has with him. However, once the assessment is done, the final decision comes from intuition.
Today, several founders fear the day when they are unable to continue to work on their start-up project without finding an investor for some funding. On the contrary, some serial entrepreneurs build on the capital raised, seeking out great, scalable thoughts/ideas and working on them swiftly with the help of an early stage funding followed by a series of around in quick succession. Nevertheless, every start-up has varied requirements just as every founder works on a different game plan, however, when it comes to considering how and how much to raise, there are some points that every start-up must consider.
Before we move on to the ‘how’ and ‘how much’, let’s understand what is seed funding? Seed funding/capital can simply be described as the initial capital raised by a company/start-up for its built-up. Now the question, why is seed capital required? Seed capital is an important aspect for a start-up without which it would fail even to get started. A good amount of money not only lets a start-up to live and grow but also paves the way for a competitive advantage over its rivals in terms of hiring people, marketing their business and indulging in public relations. Thus, most start-ups would always want to raise a good amount of money to cash on early to this competitive advantage.
Without a proper seed funding majority of the start-ups would die. Thus, ideally, a start-up would require as much money as it would need to reach profitability so that it doesn’t require raising money again. If the start-up tastes success here then not only will it find easier to raise money in future, it will also be able to survive without any new funding to face any financial challenges that might arise. Having said that, their aim must be to raise as much money as required that would sustain them till the next year and a half. By now we know what’s seed funding and what its significance for a start-up is? Now let’s look at another major aspect which is the means from where the start-ups can get seed funding. Though there are several ways through which they can avail seed funding, we have listed some few important ones.
Today, the majority of the start-ups look at crowdfunding as a major source of seed funding. The reason is a vast amount of website crowdfunding platforms being available, such as Kickstarter through which millions were raised in the past. For start-ups lacking any major sponsor from the family, crowdfunding is a great way to raise funds.
Start-ups looking for seed funding can at times look at some business accelerators for help. Majority of accelerators offer small seed investment up to a certain amount along with mentoring, workspace and professional services, in return for an equity stake in the company.
Established giants such Google, Intel and FedEx do provide seed funding to promising start-ups working on some new technologies.
Unlike accelerators who provide a particular program to start-ups for a fixed period of time, generally 3 to 4 months, incubators tend to be more open-ended. Still, they often offer small seed investments, similar to those of accelerators. Several local bodies provide these to facilitate local new business development.
Seed funding is an essential and at times excruciating task most start-ups face. A founder should aim to raise more funds in the shortest possible time and the above points will certainly bring a sigh of relief that would lessen the agony and maximise chances.