Getting started in business requires creating a winning idea, which is challenging enough – but taking your idea to market requires more work. Any new idea requires funding, regardless of how revolutionary it may be; money must be devoted to equipment, space, employees, and staff, among other important aspects of the company.
Funding from seed capital (also known as seed investment) and seed funding are typically the first round of significant funding a company receives (typically between tens and hundreds of thousands of dollars) and dictate your ability to attract investors in later fundraising steps. https://qilindo.com/ tells you about how to find a seed investor.
What is seed money:
Seed money, also called seed capital or seed funding, is a private investment of capital in a startup in exchange for equity. Not every seed investment is worth millions, but most are worth between tens of thousands to hundreds of thousands of dollars. Usually, venture capital firms won’t invest anything below $1 million, whereas a seed investor may expect to invest no more than that amount.
Seed funding differs in several important ways from venture capital, but the amount invested stands out as one of the most important. Venture capital funding typically ranges from $1 million up to about $30 million, whereas seed funding is typically significantly less and it serves to keep a business afloat until it has generated sufficient cash flow and can acquire more significant funding.
Another important distinction is that venture capital investments are typically made by institutions, whereas seed funding is typically done by individuals, including angel investors, crowdfunding, and even friends and family.
Who are Seed Investors?
Typically, seed investors, also called Angel Investors, are individuals who are interested in investing in early-stage companies. Generally, groups of seed investors exist in your local area. You might also want to find incubators or accelerators, which are groups that might also offer office space and access to experts.
It is important to prepare yourself in advance before approaching an angel investor since they typically reject 75% (or more) of investment proposals. If you can secure funding from an Angel Investor, this will increase your chances of success dramatically. Angel Investors have not only money, but often have significant experience as well, and if you are successful, this will significantly enhance your chances of success. If investors hadn’t thought they would get a return on their investment, they wouldn’t have invested at all.
Ways to find a seed investor:
The following list of sources for seed funding includes some popular options. It is important to note that this section isn’t comprehensive, as it only details the simplest initial fundraising methods. You can raise capital for your company at any stage of growth using some of the sources of funding, which are not mutually exclusive to seed funding.
Crunchbase:
Investing in CB is one of the best ways to gather more information about investors that interest you. Listed below, you will be able to search for VCs or investors by a variety of criteria.
For the free versions, CB allows you to filter data only based on two criteria. Although there are dozens of parameters available, you cannot search for an investor focusing on specific verticals, locations, or check sizes due to the limit of two.
Crunchbase Pro, the premium version, allows unlimited filtering parameters for $29 per month. In addition to the advanced features listed above, CB Pro provides charts, analysis tools, advanced search capabilities, custom alerts, and Excel integration. CB Pro is one of the more reasonably priced resources currently available on the market, unlike Pitchbook and Capital IQ which are astronomically priced.
Friends and Family:
As a second option, you could borrow money from your closest friends and family, to repay them later. In any case, be sure to disclose exactly where the money goes, how you plan to compensate them, and the risks they face should things fail. They may want to be investors in your company or they may just want to lend you some cash.
Investments Crowdfunding:
The advent of widespread internet access has made crowdfunding websites an easy way to raise seed funding. Investing in early-stage projects has become easier with the advent of sites such as AngelList, Kickstarter, Wefunder, and others that allow investors to cover upcoming projects in return for early access, perks, and/or other benefits. A crowdfunding site can be a valuable seed funding source or even the only source of funds if the hype is great – however, because it is impersonal, you must be open to communicating with many people and be transparent about your project.
Microloans from the SBA and microlenders:
There are other options to find seed investments, including Small Business Administration (SBA) microloans through microlenders. In the US, the government offers these loans through private loan lenders or community-based nonprofit organizations that can fund up to $50,000, though the average microloan is only $13,000. Using these funds can be limited to working capital, inventory, furnishings, and equipment, and can not be used to pay existing debt or to purchase real estate.
Personal Finances:
You will have to fund your project. Your first source of funding should be you if your idea truly makes sense and you have the resources to spare. Consider liquidating valuable assets (antiques, collections, rare items, etc), taking out a home mortgage, or any other method of raising money that will lessen the amount of fundraising that needs to be done externally.
There’s nothing wrong with going broke on an idea – but investors can tell how serious you are by how much money you invested in your venture. Some wealthy startups can obtain funding from personal resources if they have enough reserve wealth, but this is rare, especially for small businesses. Personal funds should be used with caution, but note that if one invests more personally, he or she develops a larger amount of equity, which directly impacts profits.
