How to Raise Seed Capital and Make Your Start-up Soar
How to Raise Seed Capital and Make Your Start-up Soar
Even the greatest ideas need a boost to spring. As an entrepreneur, you may have a vision but the capital to make it soar may not always come in handy. So how do you do it? Definitely working 24/7 or declaring war on your savings account will not turn you into a business tycoon overnight. Seed capital, on the other hand, can help you transform and grow into the billion-pound business founder you've always wanted to be. Here are a few tried and tested tactics that we used to lift FundMyPitch off the ground.
Preparation and preparation
First, you must prepare yourself for the meeting with potential investors and put together a list of project supporters and experts willing to endorse your idea. As a founder, you should be ready to get out of your comfort zone and be as creative as possible with funding.
Typically, angel investors want to know the founders and develop an interest in business ideas that translate the core concept into a high return on investment (ROI). Notorious angel investors include former CEOs and bigwig entrepreneurs with an enviable track record of successful IPOs. They also started by “planting the seeds” of their own tiny yet ambitious start-up that grew into an industry giant holding the front pages of the financial media.
But what is the seed stage? The seed stage is the preliminary phase laying the groundwork for a start-up to grow and thrive, in order to start rolling and generating revenue data for the next seed round.
To make a good first impression and gain the trust of your prospective investors, you must have a business plan, with comprehensive projections and raw numbers ready for them to look at and get a single view of how much funding your start-up needs and how the resources will be allocated.
A powerful business plan includes a detailed analysis of the strengths, weaknesses, opportunities, and threats (SWOT) facing your start-up. As a business founder, you should have a clear idea of how angel investors make decisions and what they look for in a start-up like yours.
The time has come for you to test your numerical skills by putting together a cost projection and be prepared to present it and defend it. You must also think beyond the numbers and determine how much of your own business you can afford to surrender to your investors to gain their trust. It's also vital that you understand your investors' interests and goals to propose a capital structure that will satisfy everyone involved.
Planting the seeds of a successful business is all about analysing best-case and worst-case ROI scenarios that should form the basis of your negotiations with investors. These figures will help you determine stock ownership.
Start pitching investors
Business plan ready, it's time to pitch investors. The main focus of your seed round is attracting investors and keeping them engaged. If you already have established a small business, winning over investors before the seed funding should be easier than if you were only at the planning stage. This will give you more credibility in front of your investors because let's face it, nobody wants to be the first to take the chance on a start-up that only exists on paper.
This is where your project supporters step in. Speaking of project supporters, don't forget about marketing and PR. Securing a few media placements and establishing an impeccable online reputation is part of your big seed investment deal.
With more than 5 billion internet users worldwide, of which 4.70 billion are also active on social media, having an attractive social media presence is paramount. You may also wish to explore the realm of influencer marketing. It helps. We will follow up on this later, so keep an eye on FundMyPitch, we'll be pouring more marketing ideas, tips and tricks for clever start-ups later. Meanwhile, let's get on with our seed funding.
Don't be afraid to get out of the shell
Don't run from the spotlight. This is your chance to shine by establishing yourself as a thought leader in your area of business. Sell, sell, sell, but don't overdo it. What do we mean by that?
When approaching investors, do consider a set of provisions on your promises. Never promise more than you can deliver and, most importantly don't raise the stakes too high. Look at anywhere between £20,000 to £50,000 as an initial investment to leave room for negotiation and make investors aware of the downside protection.
Mentoring is key
We all need mentoring from time to time. Working with a start-up incubator or accelerator will help you take your start-up to the next level. What do these companies do?
Both start-up incubators and accelerators offer programmes for fledgling companies to help them find their way, covering a variety of areas from seed funding to legal advice, mentoring, business advice, access to investors, networking opportunities, workspace provision, and more. These may differ on a case-by-case basis, as there is no sealed-in-stone structure or time limit to the service a start-up incubator or an accelerator provides.
However, there is a semantic difference between the two, albeit they are used interchangeably. As the name suggests, an incubator nurtures businesses until they've managed to define and enact their vision, whereas an accelerator takes an established company and drives it forward.
Whether you need the guidance of an incubator or an accelerator, depends greatly on the development stage you are at. If you're at the beginning of your journey, the services of an incubator could help you find your feet as you navigate the challenging path of seed funding.
FundMyPitch covers a broad spectrum of incubator services, ranging from mentoring and business advice to networking, connecting you to angel investors. Tell us more about your idea and we'll make it soar. Together.