How to Get Seed Funding To Grow Your Business In 2019
You may have the skills to help build the products or offer the services you’re providing, but with the money missing from the picture, you have a long way to go before you’re successful.
Starting a business may not be a walk in the park, but it’s never impossible.
This is especially true with increasing options for seed stage funding readily available.
With an increasingly dynamic economy, the constant advancement of technology, low cost of entry, and other startup assistance readily available, what more do you need?
Before you get excited about finding and acquiring seed capital, how do you know how much you really need?
By establishing an 18-month timeline focusing on your goal to obtain adequate finances, you can secure your business in the case of just about any mishap.
As an entrepreneur, the earliest stages of doing business are critical points; they can either make or break your spirit.
So the real question is, “How to get seed funding for your business?” In this article, we’ll cover several methods you can use.
Understanding Seed Funding
Also known as “seed capital” or “startup funding,” knowing how to find seed funding is more than just understanding how to find investors; it's a form of financing wherein an entrepreneur receives funds in exchange for an equity stake in the business.
This is the initial funding the company needs to get established.
For those seeking pre seed funding or first round capital for a startup business, the following are the typical resources you should tap to fulfill your capital needs:
1. Your Own Wallet
Who else will believe in your startup business more than you do?
So before seeking outside financing, why not delve into your savings, credit cards, property to mortgage, or other valuable assets?
The more you pitch in from your own pocket, the more credible your investors will see you as, and they’ll respect your commitment to ensuring your business has the funding it needs.
2. Close Family & Friends
Seek help from close family and friends who support your goals and share the excitement as you get one step closer to success.
The fact of the matter is that they’ll be less likely to charge you interest on the finances they’re contributing.
So be sure to consider this option as you think about how much your business will save in interest if you avoid applying for a bank loan.
Remember, this isn’t just your business that’s at stake. Rather, your relationship with them is at risk as well.
So if they extend a helping hand, do everything in your power to ensure the relationship doesn’t go sour.
Present your business plan, and keep everything professional.
They can choose to lend you money or invest in your business, but it has to be their choice.
While investing in your business is also likely a good move for them, it’s better for you to take out a loan rather than pressure someone you know for investment.
The primary benefit here is that should your venture succeed, you can pay them back without sacrificing shares of your company.
Regardless of the size of the investment they make, be thankful they’re willing to invest in your success.
3. Seed Capital Venture Firms
A venture capital firm is composed of a group of investors benefiting from well-off people who want to increase their wealth.
The money from those investors is put in riskier businesses that traditional banks refuse to deal with.
A venture capital firm usually charges a higher rate than other lending companies.
However, these loans still provide the capital startup businesses need to progress.
Even with these loans being available, it isn’t easy to look to these seed capital venture firms with so many other hopeful entrepreneurs and small business owners doing the same.
The competition just to get their attention is tight, and the stake in your company that you’re willing to offer must be considerably more significant than a single individual will request.
The key is to find a venture capital firm that’s keen to invest in your type of business and shares the same economic interest as you.
After an introduction through a trusted colleague, fellow entrepreneur, or lawyer to the venture capital firm, prepare a great elevator pitch and a strong investor pitch to ensure you’re noticed.
Once the firm expresses its interest in investing in your business, a term sheet will be prepared by the firm—covering the important aspects of the financing.
The venture investors will invest in your company in the form of a convertible promissory note, through a SAFE (Simple Agreement for Future Equity), or convertible preferred stock investment.
4. Angel Investors
Angel investors offer more than just money to invest; they also provide mentorship.
These resources make some angel investors serious lifesavers for startup businesses.
Doctors, lawyers, and current entrepreneurs may be willing to take the risk to invest in your company.
Though they may not provide millions of dollars as would an investment from a firm, their industry connections may help open new sales doors—making way for the success of your company.
5. Federal Grants
People may see government grants as free money because they’re not viewed as loans and aren’t required to be repaid.
If your business is qualified for government grants, make sure to take advantage of them.
Begin your search at Grants.gov. Through this resource, you’ll find thousands of federal grant programs.
Grants can provide from thousands to millions of dollars for a startup venture, making them quite practical for entrepreneurs looking to obtain seed funding.
The process to apply and get a grant may be complicated, requiring research and focus.
Be prepared to gather data, fill out forms, and acquire necessary certifications.
Processing time may take six up to nine months before the money will be given to you.
But isn’t it worth the wait?
You may seek professional help to process your grant application and score your selection chance for an additional cost.
If the pros can lift the burden and decrease the waiting time, it could mean your business will become profitable faster.
Since tax dollars are funding grants, you should expect the way you use your grant to be under strict scrutiny.
Make sure always to have your expenses in check, or you’ll risk incurring a violation.
Concluding On How To Get Seed Funding
With your vision for your company in mind, steer your business towards success.
Having the right partners at the table will help you not just for the short-term, but also in the long run.
As you acquire your seed funding, stay on track to succeed and work vigorously as you progress your company forward.
Keep these tips in mind as you strive for your funding: be knowledgeable, plan ahead of time before meeting with investors, and foster relationships with your investors.
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