Seed stage capital normally involves itself during the payment of expenses such as sundry costs, marketing costs, and production development acquired by startup including expenses regarding company registration and legal fees. Throughout the experience of seed capital investment, it has been consistently found that a start-up company requires more funds at the beginning stage than the originally planned funds. The estimated expenses are normally on the other lower aspect of reality. So raising enough amount of seed capital is very significant.
Relevance of Seed Stage Capital for Your Business
If you aren’t able to raise a necessary amount of seed capital investment, you might have to go for the second round of funding. The second round could be riskier as in result; it may dilute your shareholders and investors who invested during the first round of capital investments. At many instances, investors may realize that you are in a desperate need of money during the second round and, therefore, they can take advantage of such situation. It is very important to raise the right amount of seed stage capital in the first time.
Guide for Founders
There are so many options to avoid getting trapped into schemes of investors during the second round. The first option is by not going for the second round at all, which means getting as much investment as possible in the initial phase of the investment round.
Let us go through them one by one:
#Attract As Many Potential Investors Possible on the First Go
Create urgency, and attract as many potential investors possible in the first round. The phenomenon of raising capital is similar to that of sales. Start networking and connecting with potential capitalists. Make a list of investors you know and the other list with names of those you do not know. Try manipulating them into funding your startup because, many a time, capitalists are motivated by other capitalists who are committed or interested in a deal. You can easily leverage the interest from a particular group to establish urgency with a different set of the group. Let investors know what you have laid on a table for them in terms of written or verbal commitments.
#Develop a Robust and Multifarious Team
You shouldn’t work alone over developing a product for your startup company. Instead, assemble a multifarious and strong team that includes potential buyer, technical person to develop a prototype, and a marketing or sales person. Start with functioning with different levels of operations in your startup, so that you can understand the level of requirement that each and every department requires. This might help with calculating the estimated cost of production, processing, packaging, etc. For example, start with the CEO, move to department managers, eventually moving to users as the concept starts framing.
#Accurately Portray Your Business Model
Prepare an accurate and neat portrayal of your business model. Stay prepared in advanced with analyzed data and sheets on how your business will be scaled. The best way to stay well-prepared is to keep a track of customer traction and validation. Show results from your past performances, as it can predict your future success. No executive summary, pitch deck, business plan, or financial model will help you to achieve what validation and results can. Once you have collected required amount of reports on customer validation, prepare all the materials into a financial model via a well-prepared and compelling presentation over the whiteboard, PowerPoint, keynote, etc. This would fascinate investors as it displays authenticity and genuineness instead of false talks.
#Look Forward To a Clear Goal
Convince your team and work towards a common goal. Once you have raised the correct amount of seed capital, start making plans about the areas you and your team needs to mainly focus on. Ideas of every individual should be welcomed warmly, and also, take consideration of customers, seed capital investors, and shareholders while setting a common goal.
If you are following these steps carefully, then you will eventually develop a product, which is good enough to fascinate and convince customers to buy it long before your startup goes through its journey of seed capital. Following these procedures, you will easily overcome hindrance that is coming between the success of your team.
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