Raising money for your startup is no picnic. It constantly distracts you from concentrating on development of your product. Convincing investors to pour money into your startup is itself a mammoth task and if you’re trying to raise seed funding for your startup in the idea phase itself put on your guard and prepare yourself for a battle.
Seed funding is the initial capital used to start any business. Seed funding or capital mainly comes from the founders’ personal assets or family and friends. Ideally, one should start raising funds when his/her product fits in the market and customers love it. However, people are now looking for funding at the idea phase itself. Listed below are a few ways in which you can raise seed funding for your startup at the idea phase itself.
Family, Relatives and Yourself
To raise seed funding for your startup, your best move as a co-founder would be to provide it yourself. Consider your own savings and other valuable assets you own. This will increase your credibility in the eye of potential investors as it will prove that you truly believe in your venture. If you find yourself unwilling to invest in your own idea don’t approach anyone for funding. Take a step back and refine your idea.
If you don’t have enough savings, the best people to approach would be your close buddies, acquaintances and your family. Persuade your peers and family that you won’t lose their money and make them believe in your idea. If convinced, make them partners by offering equity or accept the money as a loan.
Valuable idea – key to raise seed funding
Your startup’s net worth will be established by the investor’s belief in you and your idea. Do not seek to raise seed funding, until you have something innovative and valuable to offer. To your potential investors only the result matters. The efforts you’ve put in to make a flawless marketing plan and perfecting your idea, doesn’t really count. Investors will provide you with funding only if you successfully convince them to believe in your idea.
Customer validation – The best reviewer
Prior to setting meetings with any investor to raise seed funding, try to seek out potential customers. Do a survey, talk to your target customers about your idea or show them the prototype. The best validation you could get for your idea is if the customer is ready to be an alpha customer.
However, do not go for this step unless you are sure about the quality of your product. Reputation matters. While meeting the potential customers note their responses, comments and feedback. Duly note what features of your product they liked and ask them if they wanted something more that you might have missed it.
If the customer places pre-orders you start generating revenue even before approaching investors. This is the ideal validation which guarantees that your idea will raise seed funding. A caution – DO NOT use a customer’s pre-order money for funding your startup until you’ve successfully delivered the product. If you fail to deliver the product this could get you into legal issues. Also, your initial customers are very significant make sure they are happy with your product.
Also Read: 8 essentials for raising seed funding for your startup
Previous startup success
If you’ve already built a startup that has been a success and your investors are happy as their bet paid off, your chances to raise seed funding even during idea stage is extremely high. You’ve already proven that you know how to build and run a successful startup. A success story shows you have innovation in your blood and that you indeed are a true entrepreneur. This increases your credentials and you become a suitable option for the investors to place their bet on.
Look for lenders not investors
To raise seed funding, you generally turn to your family or friends. Now, these people are genuinely not interested in becoming investors. They probably give you their money to help you out. Thus, you are better off taking this money as a loan rather than an investment. When the numbers are small, you can easily pay them back when you venture starts generating revenue. Accepting the money as a loan and paying it back is better than giving equities for small amount.
Crowdfunding
Crowdfunding is an attractive way to raise seed funding for startups that don’t have any resources of their to own to fund their startup. Quality fund can be raised via crowdfunding if you have a great idea, and an appetite for creating good and clever videos that go viral. Another requirement would be enough connections to start a strong social media campaign. Although, competition is fierce on crowdfunding sites, the right pitch will serve a bonanza for your startup.
Show you can Bootstrap
Bootstrapping is as important for a startup as breathing is for all humans. It’s an absolute quality for an entrepreneur. Bootstrapping shows your investors how efficiently you can work with little money. It gives them confidence that you will use their investment coherently as well. If you want investors to be excited enough to pour money into your startup show them how efficiently you execute with little resources.
Raising investments for your startup will always be a mammoth task. The above stated points may come handy while you seek to raise seed funding. Share with us your experience with fund raising.
