What is seed capital, and how to obtain the seed capital for your startup as early as possible!
Author : Senior Writer at Chatur Ideas
Posted : 2 years ago
  • What-is-seed-capital

An entrepreneur’s way of life is hard and daunting, but the reward of the initial struggle and relentless dedication mostly if not always is usually transcendent. Everyone who wants to start a business can call himself or herself an entrepreneur, but to attain the real success you must have a skillset. It is a skillset, which embodies a prodigious combination of wit, determination, and hard work along with an extraordinary acumen. In an entrepreneur’s journey once you pass on these preliminary requisites to initiate your startup, very soon you will find yourself in a situation where your would require money to fuel you business. If you are a rookie entrepreneur who is looking for seed funding options and reading this then this post will certainly be of a great help to you.

So, what is seed funding anyways? In non-technical language, it is a small initial capital, which is used to start your business. In India, any type of investor can initiate an initial round of funding. Most of the seed capital for startup comes via founder’s personal assets or from friends and family. Professional seed funding culture has just started to warm up in our country. Seed fund or the new model of micro VC’s is relatively the same. At present, the most active tech seed fund in India is Blume Ventures. Apart from accumulating funds to start your business, the perks of securing a well regarded and professional seed fund for your business will also create a very positive signal for downstream investors, making your journey to raise follow on capital much smoother.

Although, there is no concrete answer from where you can raise the seed capital for your startup, some prefer to raise it from an angel group, some prefer individual influential angels or seed stage institutional investor and some choose all of them.

Listed below are some chatur tips to all the entrepreneurs expecting or looking for seed fund…

Have the rigor to be a bootstrap…

Bootstrapping is not a financial term it is an ‘Attitude!’ In the famous words of Marcus Gibson, “running a business is very tactical and not strategic,” getting to know how to get from a point A to a point B with limited resources requires a tactical mind set. It requires well deliberated planning and execution. Your potential investors will be very interested to know that how well did you manage your own personal resources. It will give them a sense of relief knowing that you have handled your personal resources efficiently and you will do the same justice to their investment as well. There are countless numbers of ingenious business models, which failed to raise funds only because the investors did not have the trust and confidence in the entrepreneur’s ability to manage investments competently.

Pitch a realistic vision…

It’s needless to say that an early stage investor will seek tangible validation. So, instead of pitching your dreams and passions, showcase them how your business will scale with a simple validation proof. No fancy business plan or passionate speeches match up to a simple validation of past performance. If you feel you have enough customer validation then prepare a strong financial model that precisely predicts the scalability of your business. Make a PPT or video demonstrating precise data. Believe us they love it!

Customer Validation…

As suggested earlier a proof of validation is more important than anything else so before you ask investors the money to fuel your business, if it’s product than get a prototype ready. If it’s a service based startup than nothing works better than showing to your investors that you already have ‘X’ amount of customers committed to your service.

Reach out to the maximum investors and seek feedback…

It’s a simple math of life, if you will ask 100 people to help you in a task, only 50 will listen to you, in which, 20 will actually show interest in helping you out, and finally only two or three people will help you out. This philosophy works analogously with investors as well. This theory also has another entry point as well! When you speak to many investors, you also get a chance to leverage the interest of one investor to another. Although, it’s like walking on a broken glass, but if you are able to take the risk and keep the necessary balance. Then you can create a sense of urgency by letting the investors know that you already have few verbal commitments on the table.

Never forget to make pointers during the meeting to gauge investor’s apprehensions, likes, and dislikes. Feel free to ask for a feedback as most of angels or investors, themselves started off as entrepreneurs and they would love to help. So, make the most of that meeting and seek as much as advice as possible.