Seed investors: How does your startup secure one?

💸 Fundraising
Dec 8, 2021
Seed investors: How does your startup secure one?

The initial investment in a startup is usually made on a personal level; whether they use their savings, sell whatever assets they presently hold, or take out a loan from friends or family to make their dream a reality. While some startups are lucky enough to have adequate finances to maintain their expansion after early success, the reality for the rest is that they must rely on seed investments to help them grow.


It is critical that, as a startup, you have a properly completed business plan to present to potential investors before even considering seed funding. Investors must be persuaded to part with their money, and in order to do so, you must have a clear vision that investors can follow every step of the way. While a strong business plan and vision may be sufficient to attract investment, the people who drive the vision are frequently the deciding element in whether or not this opportunity can realistically create lucrative returns in the future. This is why it is critical to understand your business model and plan thoroughly to demonstrate that you are the firm to which they should pledge their investment.

How to secure seed investment funding for your startup.


Types of seed investors

Seed capital investors

A startup receives investment from some of the larger firms to help them through their growing transition in exchange for equity in the company's future success through ownership. Securing the assistance of a reputable firm not only provides funds, but it also gives the company legitimacy and brand exposure, both of which may be quite valuable when seeking additional funding.


Angel investors

Angel investors, like corporate seed investors, fund the startup's development and seek financial returns through ownership. Angel investors are often seasoned entrepreneurs who can offer you expert advice based on their previous experience working with businesses. It is often beneficial to connect with angel investors as they are putting their money into your business, therefore you both want to see it succeed so they are more involved in it’s work.


Crowdfunding

People are wanting to invest in firms they believe in, therefore crowdfunding platforms for startups have grown in popularity in recent years. Crowdfunding is when a firm posts a concept on the internet and invites others to invest in the company in exchange for equity in the company. This usually results in a bigger number of smaller investors assisting you in meeting your capital objectives. Crowdfunding makes it easier to find new investors outside of your network, but it also means you won't be able to take advantage of some of the contacts and resources that a single majority investor may bring.


Accelerators and incubators

Accelerators want to assist your startup get off to a fast start and give you the resources you need to help your startup develop quickly. Accelerators frequently provide mentoring, cash, and contacts in the hopes that you will be successful and that the equity they get out of the company will provide them with a profitable return on their investment in a shorter period of time. Incubators, on the other hand, are concerned about the firm's long-term aspirations. They aim to educate and nurture the startup by offering professional support for startup coaching, from whom they will learn how to run their firm on a greater scale without expecting a return on their investment in the form of shares. They advocate for building a business over years rather than months.


It's critical to recognise that there is no one sort of seed investment that is better than the other; it all depends on the business and what type of investment will give them the best chance of success, which any of the above opportunities available can deliver with the right company.

Top tips for securing the right investment for you.

Our top tips for securing the right investment for you

  • The largest capital proposed by an investor does not always imply that it is the strongest offer! Some investors may be able to provide you with something far more valuable than money.
  • Make sure the market opportunity is large enough for potential startup investors to realise a substantial return on their investment before approaching.
  • While an idea is exciting, a startup that has gotten their idea off the ground and seen early signs of growth or even generated a beta version will provide a potential investor something to look at and understand what their money will be used for, offering them more confidence in the investment's potential success.
  • Keep in mind that the prospective investor isn't just interested in your product or idea; they're also interested in you! Demonstrate why you are the right person or group to take this company to the next level. A potential investor will be considerably more likely to supply you with the support you require if they see that you are passionate and knowledgeable about your venture, as well as having the ability to solve problems that have already been solved and understand those that may come.


Amit Khanna, 7startup Founder

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.



Tags: Startup funding, venture capital, scaleups, fundraising, pitch deck review, OKRs, seed investors, equity research

Ask an expert