Seed funding or seed-stage funding is an early investment that targets assisting a business with developing and generating its own capital. Likewise referred to as seed cash or seed capital, investors frequently get an equity stake in return for the capital invested. The financial specialists would themselves be able to be the founders and utilize their investment funds as seed cash for their startup — otherwise called bootstrapping.
Importance of Seed Funding
Starting a new business and lifting it up off the ground is a huge task for most business visionaries and it just gets harder with capital constraints. Seed funding kicks things off before the business acquires any income. It is a viable solution for startups and developing organizations as it gives much-needed early money related help. It can take care of everything from framework costs, marketing, and development costs just as the expense of initial hiring. Investment is the fuel of any business and seed funding is the principal drop of this fuel. As seed cash turns out to be truly necessary money save or working capital, not having it is one of the fundamental purposes behind its failure.
Types of Seed Funding for Startups
On the path of seed funding, the first step is understanding the different type of investors or potential investors as there are multiple sources where one can aid from:
Crowdfunding
With more than 500 crowdfunding stages currently active, this has become quite possibly the most mainstream road of seed funding. Crowdfunding platforms are generally open and anyone in the world may end up backing the concept, idea, or product.
Incubators
Incubators by and large provide small seed investments and offer services, for example, office space or management training. Most incubation programs don’t take equity from the startup, however offer help beyond just funding. The Indian Angel Network Incubator, IIT-Bombay’s Society for Innovation and Entrepreneurship or SINE, Khosla Labs, and state-sponsored hatcheries, for example, T-Hub and KSUM are probably the most active incubators in India.
Accelerators
Accelerators are more centered around supporting startups in scaling up their business rather than backing and nurturing early-stage innovation. Accelerators likewise back startups through little seed financing along with professional services, networking opportunities, mentoring, and workspace. In contrast to most incubators, most accelerators accept equity as they are privately funded. The well-known accelerators incorporate Y Combinator, Techstars, and 500 Startups.
Angel Investors
Angel Investors are people that offer capital instead of ownership equity or convertible debt. They are called Angel Investors since they give capital at times when the risk of a startup fizzling is genuinely high, which is during the beginning phase. The top angel investors of 2020 are Sanjay Mehta, Amit Somani, and many more.
Personal Savings
Founders may place in their own personal wealth and savings as seed funding. Also known as bootstrapping, this brings extra monetary pressing factor yet there is no burden on founders to return borrowed money.
Debt Funding
Debt generally incorporates cash taken from banks as loans or borrowed from loved ones. Once in a while, venture capitalists or angel investors additionally issue loans rather than equity investments to ventures in areas where cash burn is high, however so is the foothold.
Convertible Securities
These are investments that start off as loans yet change into equity or shares relying upon the progress of the organization, and when it arrives at specific achievements, for example, sales or revenue targets.
VC Funding
Venture Capitalists are marquee financial specialists that provide funding dependent on various parameters, for example, growth potential, market conditions, founder vision, idea, or simply execution. Consequently, they take some segment of equity or stake in the startup. VCs typically join different rounds of investments after the seed stage, if the startup managers to arrive at those rounds. For seed funding, Accel Ventures, Seedfund, Sequoia Surge, Axilor Ventures, SEAFund are some of the most venture capital firms in India.
Angel Funds or Angel Networks
Sometimes, investors meet up to form angel networks or groups where they each invest small quantities in the thought or the organization during the early-stage of the financing round. The significant angel networks in the market as of now are AngelList, Indian Angel Network, Lead Angels, just as heavenly attendant organizations for each significant startup center in India.
How to Raise Seed Funding?
For the best investment in terms of amount and investor relations, founders and business people need to investigate the investor market and find an investor that is active for the area it works in. Startups ought to likewise be prepared with all the administrative work and bank subtleties that will be required for the transaction. Quite possibly the main piece of impressing the potential investor is the pitch. It should be precise with all the necessary data that the investor would want to know. The pitch ought to incorporate all projected information and justifications for those projections. In the event that the numbers appear to be noteworthy and attainable to the financial specialists, they will proceed towards the negotiations. This way, startups can collect seed cash in India and abroad.
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