From a Small Seed a Mighty Trunk May Grow (Aeschylus)

How important is money to you? I have come across entrepreneurs who are quite concerned about money. Not because they are looking at making large profits, but to find ways to fund their entrepreneurial ideas. Contrary to popular belief, funding is not one of the top challenges for an entrepreneur today. If you know the ropes, you will find it easy to get funding at every stage of your startup journey.

The biggest barrier to starting a company isn’t ideas, funding or experience. It’s excuses. Sarah Lacy

You got it right; the catch phrase is at every stage. The time and effort you spend to consolidate your idea, do your research and formulate your model is the initial stage. At this crucial stage you would rather focus on building your startup than on where the financial support will come from.

To see things in the seed, that is genius.Lao Tzu

All you require is a small capital or what in financial parlance is called “seed money” that will sustain you till you have something concrete that can be showcased to solicit serious investment. Entrepreneurs normally look at family and friends for seed money other than external investors like angel funds and crowd funding. Naturally, the investor will look for some form of returns on the investment that is being made. At this stage what can you offer your investor other than an equity stake in your startup? With an external investor, this equity stake can be to the tune of 25% or more and they may also want controlling interests in your company. Of course, you can always “bootstrap” your enterprise, in other words fund it through your own savings. The seed fund investor is the “genius” who can see the “future” in your idea.

The more angels we have in Silicon Valley, the better. We are funding innovation. We are funding the next Facebook, Google, and Twitter.Ron Conway

Looking at the trend of seed money paid since the beginning of this year, the amount ranges between twenty thousand USD to over a million USD. Sandhya Hegde has compiled a useful list of investors in one of her articles (The link to the article is mentioned in the references.) Many of these investors will work alongside you as your partner and provide valuable guidance. With the kind of experience these investors pack you will not get a better mentor.

Seed investing is the status symbol of Silicon Valley. Most people don’t want Ferraris, they want a winning seed investment. Sam Altman

You will be looking for more information on this subject and to help I have cited a few startup stories that also share some facts and figures of their experiences (The links to these articles are mentioned in the references.). You will find these stories quite interesting and you can pick up tips on how to proceed in your fund search. A word of caution to all entrepreneurs who are in the process of starting a business, judiciously use the funds raised as it will have to last till you can raise more funds or till your business can generate funds of its own. What this means is that either you have a performing product or service that is earning money for your business or you have something that is more than a framework, which can be used to convince other investors about the viability of your product or service.

When I was young I thought that money was the most important thing in life; now that I am old I know that it is. Oscar Wilde

While you are on your quest for knowledge you may want to review the blog on fundraising strategies titled “Money Trail” and the blog titled “Hunting the Unicorn” which discusses venture capital funding. You can expect more related blogs from Dr. Preeti and myself, so keep in touch.

REFERENCES:

1. Yatti Soni. RBus Raises Seed Funding From India Quotient, People Group’s Anupam Mittal And Others. 2015. http://inc42.com/flash-feed/rbus-raises-seed-funding/
2. Sriram Sharma. India Funding Roundup: Roposo, Orobind, Fixy, HyperVerge, MSM Box, YourStory. 2015. http://gadgets.ndtv.com/internet/news/india-funding-roundup-roposo-orobind-fixy-hyperverge-msm-box-729332
3. Anna Vital. How Funding Works  Splitting The Equity Pie With Investors. 2013. http://fundersandfounders.com/how-funding-works-splitting-equity/
4. Jubin Mehta. How much is your valuation and equity dilution in the first round of funding? 2014. http://yourstory.com/2014/03/startup-valuation-equity-dilution/
5. Sandhya Hegde. Who’s the best seed money in India? 2015. http://yourstory.com/2015/03/best-seed-money-in-india/
6. Evelyn Fok & Shonali Advani. ET survey: Why startups are raising seed capital from large VC firms. 2015. http://articles.economictimes.indiatimes.com/2015-08-21/news/65706276_1_venture-capital-orios-venture-angel-investors