A Guide to Seed Fundraising

Introduction Equipment must be purchased, offices must be rented, and employees must be hired. More significantly, they must expand. To execute these tasks, companies will almost always need outside cash. Seed money is a term used to describe a company's first round of funding.   

A Guide to Seed Fundraising

Why Do You Need to Raise Money?

The great majority of startups will fail if they do not receive startup funding. The amount of money required to bring a startup to profitability is typically far beyond the founders' and their friends and family's financial capabilities. A startup is a firm that is designed to grow quickly. Prior to establishing profitability, high-growth organizations nearly always need to burn capital to maintain their growth. Only a few startup enterprises succeed in bootstrapping (self-funding), but they are the exception. Of course, there are many successful businesses that aren't startups. 

Cash not only allows startups to survive and develop, but it is nearly always a competitive advantage in all areas that matter, including employing key personnel, public relations, marketing, and sales. As a result, most businesses will almost definitely seek funding.  The good news is that many investors are looking to invest in the right startup.


When Should You Raise Seed Money?

Seed funding has gotten a lot of attention because it's the default choice for each new business, regardless of whether the money comes from outside investors, bootstrapped funds, or family and friends. So, when should an entrepreneur start looking for seed money? It's usually the perfect moment to raise initial funding once founders have their idea and business model.


The time of seeking seed money can have a significant impact on the outcome, therefore founders and entrepreneurs should be well-prepared with a detailed business strategy, market research, and product development roadmap before making their decision.


How to Get Seed Funding

Although each startup may choose to pursue seed money at a different moment, the process of raising seed funding stays largely the same regardless of industry. Of course, if this is not the founder's first startup, the seed capital round will be easier due to previous connections.


However, it is important for young founders and startups to understand the seed funding market and who to approach. Remember that there is no other approach to raising seed financing, as it differs from one startup to the next, and entrepreneurs can raise seed funding from several sources. Whether asking friends and family, incubators, angel investors or even venture capital firms, the most important thing is that the seed round is substantial enough for the startup's product or service to establish momentum in the market or meet other milestones.


Seed Funding Sources for Startups

The first step on the way to seed capital is to understand the various types of investors or possible investors, as there are a variety of sources to choose from:


Revenue from a Business

One of the most effective strategies to get seed financing is to generate income from the startup you're working on. This strategy has recently gained popularity since it avoids the complexities of seeking external investment or diluting shareholding. It also demonstrates that there is a market for the goods. Crowdfunding is a version of this, in which the product is shown to potential investors at various phases of development. With over 500 active crowdsourcing platforms, this has become one of the most popular seed funding methods.


Personal Savings vs. Self-Sufficiency

As seed capital, founders may contribute their personal wealth and reserves. This is also known as bootstrapping, and it puts additional financial strain on founders without requiring them to repay borrowed funds.


Seed Funds for Businesses

Megacorporations and tech giants are frequently on the lookout for new ways to invest in emerging technology. This type of finance gives the startup brand a lot of exposure and is frequently a preface to a future purchase. Apple, Google, and Intel are among the IT heavyweights that regularly invest in companies with seed money. 



Incubators are organizations that provide small seed investments and services such as office space and management training to companies that are still in the early stages of development. Many incubation programs do not require the startup to give up any stock in exchange for help. Most crucially, incubators aid in the development of ideas and the validation of market fit for new products and services.



Accelerators, unlike incubators, assist startups in growing their businesses rather than supporting and developing early-stage innovation. In addition to tiny seed investments, accelerators provide professional services, networking opportunities, coaching, and workspace to businesses.


Impact donors from around the world

One of the most common queries when starting a business to address a social issue is how to secure seed money for such a venture. This is where social impact startups can contact worldwide philanthropic impact investors, who function as seed investors for social impact startups. One of the key advantages of this type of investor is that, while the foundations are enormous, the expectations are lower than those of VCs or institutional investors, as this is primarily a source of charity for the investor rather than a business transaction.


Micro VCs: 

In addition to the aforementioned choices, micro VCs, or micro venture capital firms, have recently received a lot of attention. When a project is still in the early stage, these firms put institutional money into it.


Angel Investment Funds

During the early stage fundraising round, investors may form angel networks or groups in which they individually contribute a small sum to the concept or firm. AngelList, Indian Angel Network, Lead Angels, and angel networks for each major startup hotspot in India are now the most popular angel networks on the market.


Other feasible possibilities include micro-financing from non-banking financial businesses (NBFCs), bank loans, and debt capital from early-stage venture funds, in addition to the ones described above. Grants from the government and institutions, as well as R&D awards, are excellent sources of seed funding. Always keep in mind that proper and timely funding is critical for companies to stay afloat in a competitive market like India, where dozens of new startups are launched every week.