How to get seed funding for a startup? You have a great idea, perhaps a winning one. But what is it worth without funding and being able to get investors on board? To get seed funding for a startup and plan for future funding rounds, first, you must convince an angel or seed venture capital investor. You may have the beginnings of a prototype and perhaps a few co-founders to take the journey with, but raising seed financing can be difficult. Funding is essential, even if you have a ground-breaking idea, money is a must recruiting your team, office space, and many other aspects of the business. This article explains how to get seed funding for tech startups to bring their ideas to market – realise their business strategy for supporting growth for startup companies.
What is seed funding?
Seed funding also referred to as seed capital or seed investment is the first key round of funding a company receives, typical investment amounts at the seed stage are £10,000 – £1,000,000. Recently startup founders have secured larger seed rounds in London and the EU but it’s still safe to say that seed funding is at the lower end of equity capital when compared to Series A and beyond.
Seed funding for a startup can be secured from various sources, the most popular are Angel investors or seed venture capital investors. The more seed funding your startup can secure, the more the business can scale to get to the next round of investment. Seed funding is a vital step in refining product management to reach Product Market Fit and business development to increase the customer base by implementing growth strategies for rapid growth.
Early stage investors can evaluate hundreds of startups for startup funding but only invest in a few. Thousands of early stage startups are looking for and need seed capital, especially in tech, and this is the first step along the road to success. Like all types of equity funding, seed funding works on an ownership model leading to the founders and other stakeholders in the business owning less and less of the business and giving up more and more control to potential investors.
Why seed funding?
A pre-seed startup investment round comes before Seed and Series A rounds. This is usually a period of bootstrapping with the founding team’s financial resources. Seed funding for a startup is the fuel for the startup to grow, with ample capital to burn startups can begin to recruit or invest in marketing to increase revenues. Securing seed funding requires a well-thought-out growth plan and a convincing investment case for an Angel or venture capital firm to take a risk on the early stage venture.
At 7startup we understand investor psychology and help founders understand how to get seed funding for a startup. Through advice and consulting we eliminate business model blind spots and make your business an overall stronger investment. We do the heavy lifting, reaching out to our investment network of angels and venture capital partners for you:
- We support you with your startup valuation, investment strategy, marketing strategies, and intellectual property evaluation.
- We support lower dilution and more capital for future funding rounds matching you with the right type of investor for you and your startup.
- We develop more choices to partner with the right seed investors.
- We allow you to focus on your business growth and not waste time on the wrong source of funding or speaking to 100s of investors in dead-end meetings.
When is your startup ready for pre-seed funding?
There’s no clear barometer for a startup to meet before raising a seed funding round. However, there are a few indicators as a startup founder that you should meet to credibly convince investors:
- You have a Minimum Viable Product (MVP) and are aware of the market size.
- You can demonstrate early signs of traction within your target market.
- Strong likelihood of Product Market Fit.
- The founding team is strong with applicable experience and background.
- Customers onboarding is underway to use your product or service.
- The startup company has started generating revenue.
- You’re ready to make important hires.
How to convince investors to offer seed funding to a startup
To entice investors for a seed round, you must first make sure investors take you seriously by demonstrating your ability to grow. Investors are interested in the core structure of your business venture. They want to understand the current functions, including your startup team and your growth plans.
- VC Investors want to see a team dynamic to prove that the founders hire well. However, when the team is very small, it can be difficult to prove that the founding team knows how to find and acquire talent.
- A strong founding team demonstrates that you can address the company’s core challenges and work well together.
- The above is also an indicator that you can manage large teams.
- Research, trend analysis, and a solid plan to confidently convince investors that you can successfully execute a global go-to-market plan.
- A robust sales strategy and methodology that will scale, growing fast, and managing budgets responsibly.
- Show how you will manage customer success teams to increase the lifetime value of your customer for profitable growth alongside technical support.
- Plan and validate if channels and partners can help international growth.
We know the first step of creating a business is generating a winning idea, which is hard in itself. But there is more to do if you wish to bring your idea to market. Getting a chunk of money early in the business development process can make a massive difference in future success. As a first-time founder, if you’re in the proof-of-concept stage or haven’t generated enough revenue for growth or expansion, pre-seed funding from investors could be an option to get your business off the ground. Raising funds using an equity round, it’s important to consider how much your business is worth. Support your valuation with signed contracts and confirmed orders can help to value your business accurately.
Investing in a startup is a risky proposition for both the investor and founder. The onus is on you as the startup founder to show traction and team strength to de-risk the investment and increasing the chance of your venture succeeding.
However you plan to fund your startup, 7startup offers services for young companies poised to grow radically in the future. Plus, 7startup’s approach to founder support, including startup consulting, advisory, or fundraising allows you to scale at your own pace, in the UK or further afield.
Amit has 18 years of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising.