Tips for seed funding programs
Last week, I discussed some tips on raising expansion capital. But as the venture capital funding cycle above (courtesy of Wikipedia) shows, many companies need to survive a very perilous stage in the very beginning of their life cycle (the so-called Valley of Death). This is the stage where the core of the company is being formed, and it has to be supported by the dedication of the founders, the support of angels and seed investors, besides friends and family.
In recent years, many seed funding programs (or competitions) have been established, most notably Ycombinator and others (please see a list here) that address the needs of brand new start ups looking for funding and guidance in their infancy.
From my own experience with friends who have successfully raised capital in these programs, here are some tips for any aspiring founder to consider while looking into these:
– Aim to solve a really interesting problem: Seed funding is not about investing into a company and scaling out a product. Seed funding is about supporting the idea development and perfection, so that a company is created with a new unique approach to a substantial problem.
– Find good co-founders: Most seed funding programs consider the founding team very important when evaluating pitches and consider the high risk nature of starting up, you have to be very comfortable and confident in your co-founders.
– Look for the right program: While the funding parameters, valuation and terms are mostly standard, you need to find a seed investor that really understand what you are looking for and have the experience and willingness to support your start up. Some seed investors are very good networkers and can help you tremendously when you look for investors for institutional rounds. Some other investors are adept mentors who help founders build business growth strategies and really put together a viable business from scratch.
This is a good time for ambitious entrepreneurs to try out on their own. Leverage the right seed investors, and soon institutional venture capital firms will be knocking at your door, trying to be part of a success story.