Business Idea

How to Get Your First Seed Funding for Your Product or Business Idea?

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If you have ever thought of starting or growing a business, or perhaps you are already an experienced entrepreneur who wants to turn something you care about into a profitable enterprise, the most frequently asked question is, “How to get the first seed funding?” You also want to know what strategies you can employ to get more money, fast. There are many possible answers to this question, and the best approach is probably to know about seed funding.  

What is Seed Funding?

Seed funding refers to the earliest stages of investment when entrepreneurs receive money from a small group of investors in return for a share of the company. The investors are often willing to give more money and time to the entrepreneurs to find success early on. This helps build a passionate community of investors, who are rooting for the success of their entrepreneurs.

Seed funding is one of the most exciting parts of entrepreneurship. It’s the moment when you’ve built something people want, and the money is on the table. But how do you know how much money to ask for? And how do you maintain your company’s vision when so much of the decision rests on the investor’s decision?

Seed Funding Elements

There are a variety of “seed funding elements” that a company can raise, each with its own set of strengths and weaknesses. Each investor is going to want to see a different combination of these, so founders need to understand the various elements and be able to explain them to investors.

In seed funding, investors provide the startup with money in exchange for equity in the company. The amount of equity that is given is usually in the form of stock options, which are the right to buy more shares of the company at a discount over time. There are four main types of seed funding: debt, equity, convertible debt, and mezzanine.

Rounds 

When a company is looking to raise its first round of venture capital, it’s the seed round. Seed funding rounds are the earliest investment rounds made in a company. They’re typically the smallest and most speculative rounds, which is why they’re called “seed” rounds. They’re also the first opportunity for traditional investors to get involved in the company. Seed funding rounds are often used by companies to validate their idea, build a minimum viable product, and get their first customers and users.

There are a lot of myths and misconceptions about how and when startups should raise their first round of venture capital. Raising the first round of venture capital (or any other round of funding for that matter) is a complicated process, and the best way to understand the process is to go through it yourself. The following stages of raising venture capital will help you understand the basics of the process, and walk through an actual fundraising scenario.

  • Pre-seed funding is an alternative financing solution that allows companies to obtain funding before they reach the “Series A” stage. Pre-seed funding is also sometimes referred to as “seed funding” or “early-stage funding”. Pre-seed financing is typically used for working capital purposes, such as scaling operations, paying for employee salaries, and marketing and sales expenses.
  • Series A funding. The first time a startup raises money from a professional investor, it’s usually in the form of a Series A investment. In simple terms, a Series A investment is the first major cash influx a company receives from professional investors. More specifically, it is typically the first round of financing in which a company receives a significant amount of capital (i.e., hundreds of thousands or millions of dollars) in exchange for a small ownership stake (usually between 5% and 10% of the company).
  • Series B funding. Series B funding is one of the most exciting milestones for any startup. It’s the moment when your company is finally ready to scale and expand, and it’s the moment when you can finally say that you’ve graduated from the ranks of the small business world. But series B funding isn’t just a paper milestone. It’s the culmination of months, or even years, of hard work and long hours. It is often the most difficult stage to raise because it’s the first time that investors get a chance to see how their money has been spent and how much value they’ve generated. It also marks a transition from a company that is generating revenue to one that is proving it can generate profit.
  • Series C funding. It is also called Series C+ or Series C++, which is the stage of venture funding that follows Series B funding. Series C rounds are the largest in a series of venture capital funding rounds, typically ranging from $15 million to $50 million in size. Series C investors are usually professional investors such as mutual funds, hedge funds, and other large institutions. They are willing to accept a lower return on investment than Series A and Series B investors in exchange for the opportunity to invest in a company that is closer to becoming a household name. Series C investors are typically strategic investors that provide long-term capital and help with growth, scalability, and expansion. The Series C round is the biggest round of financing that many startups raise.

Investors

Seed investors are typically early-stage investors who are interested in investing in a company before it becomes profitable. They’re betting on the team and the idea, and they’re willing to provide funding in exchange for a share of the company’s equity. 

There are many different types of seed investors, and each comes with its strengths and weaknesses. Some specialize in early-stage investing, while others focus on later-stage companies. Some invest in just a few industries, while others are spread across nearly every industry. Your seed funding can come from different places:

  1. Crowdfunding. is a funding method that is quickly gaining popularity for small businesses, startups, and innovative ideas that require funding during the early stages of development. In this model, an individual or company who has a great idea posts a request for funding on a platform. Potential investors can view the request and decide if they wish to contribute to the project, either by investing in the company or by donating money to the project. Companies are generally able to raise significantly more money with crowdfunding than through traditional venture capital schemes. The two companies that are most famous for using crowdfunding are Kickstarter and Indiegogo. Both are great examples of how crowdfunding can be used to raise money for something that would have been difficult to raise the money for otherwise.
  1. Incubators. Incubators provide startup companies with access to resources that can help them get off the ground. They’re like a pipeline, funneling startups through a series of programs that teach them how to find customers, build a product, and sell it. The best incubators are like a training program for startups, teaching them the skills they need to get off the ground and grow into successful companies.
  1. Angel investors. The angel investor is a term for an individual or a group of individuals who invest in start-up firms. Angel investors typically provide start-up firms with business funding in exchange for equity in these firms and/or a return on their investment. There are many angel investors. Some are individuals, some angel networks.

Your Perfect Pitch

Your idea is good, your ability to convince others of its value isn’t as good. You need to be able to stand up in front of your peers and convince them of why your idea is going to be money-making. You need to convince them that your idea is a good one and that there is a demand for it. You need to be clear about your idea and what you plan to do with it. Therefore, your sales performance management skills play important role in effective communication with them.

A startup pitch is a formal and concise way of presenting your idea to potential investors or businesses. It is an essential skill that entrepreneurs develop as they move from the idea stage to the seed funding stage. The pitch is a very effective way of communicating your ideas to potential investors and other companies. Pitch is not hard, but it is not easy either, so it is something that a startup must do repeatedly and efficiently.

Usually, investors want to know each detail since they pay money to get profit in the future. Be as detail-oriented as possible and try to cover each step and “movement” you are going to do. Tell them how you are going to set work with your customers, what is your financial workflow scheme, for example, whether you are going to use any check stub maker or not. Show, how will it work, etc. 

The most common way of creating a pitch is via a pitch deck. This is a document that shows a business plan, a timeline, a budget, and the pitch. A pitch deck is typically about 90 pages, with the first 15 being dedicated to the pitch. These are often called the business plan because they cover the core of a business.

In a pitch deck, you should be able to: 1) explain the business you want to start, and why it is likely to make money and 2) show off the plan for how you are going to make money to have potential investors see that it is feasible.

Final Thoughts 

Finding money for your project is not an easy task. You should keep in mind that investors come to know if there is a market for it or not. Try to show the customer problems and the market gaps and your role in answering these demands. And finally, remember that you are selling an idea, not a product.

Read also: Top Strategies To Help Your New Company Succeed 

Techsprohub- team

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