How to Get Seed Funding for Your Business

Starting a business requires funding. Without arranging the fund, you will surely struggle to turn your business idea into a reality. Therefore, you will be looking for an investor for the seed funding of your startup. Now, when it comes to gathering funds, most people feel dilapidated as they struggle to find a path through which they can actually obtain the fund. However, there are certain ways in which you can gather the fund for your business and in this article, let’s have a discussion on that.

Look in Your Pocket

Piggy Bank With Coins

Going to an investor will mean you are giving a huge control of your business in their hands. Also, you have to share a huge amount of revenue with your investor. Therefore, you could feel like shackled. Most people start their businesses because they look for liberty. Working with an investor will not give you such a scope. Here is what you can do in this regard:

  • The best way to get relief from this situation is by doing the seed funding all by yourself.
  • You can look for the assets you have such as savings and other investments which you can utilize. 
  • You can also consider giving your house or any other valuable asset to mortgage to gather the funding.

Consult with Your Family and Friends

As the seed level funding is not a huge one, you can surely contact your friends and family members for the funding. Also, you should be inclined to put some of your cash with them as well. If you are not willing to invest your cash and want to rely solely on your friends and family for the investment then here are some of the things that your approach are conveying:

  • You are not ready to start the business as you are not ready to take a risk.
  • You don’t have faith in your idea that it will succeed no matter what. 
  • You don’t have the clarity of vision one needs to succeed in business.

Make the Investor Believe in Your Idea

Photo of Person Holding Black Pen

One of the major secrets of getting seed funding through an investor is by making them believe in your business plan. Now, this is one of the hardest things to do in front of an investor. Therefore, your presentation has to be spot on. Here is how you can ensure that your investor actually believes in your business idea:

  • Point out that your business will be adding value to the lives of the targeted customers.
  • Indicate with clarity, how the investment of the investor will be safe and secure in your hands.
  • Be clear with your vision so that the investor is able to see through it.
  • Show the investor an estimated time when you can return the money with the amount they want. Also, show them a backup idea if the primary idea does not work. It will make you appear reliable in front of the investor.

Have Calculations Ready for the Investor to See

Black Calculator Near Ballpoint Pen on White Printed Paper

Your presentation in front of the investor has to cover every nitty-gritty things regarding your business. Therefore, you have to ensure that you get the calculations right. When the investor asks you about a certain number about your estimation regarding the profit or investment is concerned, you should be able to answer it promptly. Here are some of the calculations that you should prepare before meeting the investors:

  • Marketing Budget: The investor would want to know how much you are willing to spend on marketing and how you would want to promote your business. So, you should be ready to answer that with clarity.
  • Expected Market Share: This is something almost every investor would want to know from you before investing in your business model. You need to calculate your business’s expected market share by dividing the expected revenue you will generate from the market with the total expected revenue of the industry over a fiscal period.
  • Competitor Analysis: You have to identify your business competitors and contemplate on their business strategies. In this way, you will be able to gauge their strengths and weaknesses. Your investor wants to see this to get a fair idea about your understanding of the entire market paradigm.

By doing this, you will ensure the following things:

  • By answering the exact estimation figure with gusto, you will be enticing the investor to believe in your business idea. 
  • You will also show the investor, how full-proof your business idea is and his money will be safe.
  • You will be able to gather the exact amount of funding you need from the investor in order to run the business initially.

Don’t Take Excess Money from the Investor

Close-Up Photography of People Shaking Hands

Some people think that taking excess money from investors is not a big problem. But apparently, if you take excess money then it will create a negative impact on your business. That is why you should have a fair estimation of what amount of money you need to start the business and ask for that from the investor. If you cannot comprehend that and get way more money than you need then you might face the following troubles:

  • With more cash in your hand, you could lose the focus on executing the business plan you made. 
  • When you have more cash, you will attract more obligations which are absolutely not desired.
  • More cash means, you have to repay more which will create an adverse impact on your revenue.

A Lender or Investor: Which One is a Better Choice?

If you are a first-timer, then you will have this question in mind. Well, going to both a lender and an investor will have pros and cons. If you go to an investor, then you will be looking for a considerable amount of money and you have less money to invest. However, if you go to a close friend or a close family member and get the seed funding then you will be at peace while running the business because of the following reasons:

  • If the business somehow does not go according to your plan, you can pay the money back easily to a lender.
  • When you are taking money from the lender, you are not giving that person any stake in your business. 
  • You will be able to operate your business in a much free manner and with liberty.
Two Person Doing Handshake Beside Table Inside Room

Final Thoughts

Finally, getting the seed funding for your venture depends on the clarity you have in your mind as far as your business plan is concerned. If you cannot present your business model in a proper way then the person who will be investing in your business will remain amidst the clouds of doubt. So, you will be struggling to get the seed funding. Therefore, ensure that you have clarity in your mind and the presentation that you are giving is spot on. It will surely compel the investors to provide you with the seed funding for your business.