Are you looking to start your own business? Are you looking for guidance on seed money?
It’s very inspiring to see entrepreneurs establishing something they feel very strongly about. The world needs more innovation and the market is large enough to accommodate competition and novelty. The critical stage – the seed stage – should be fortified with enough capital to stretch through the initiation period to avoid bankruptcy or shutting down. And with tons of opportunity for seed money and capital, small startups can hope to stay afloat. But how do you begin?
What Is Seed Money and Why Do You Need It?
Seed money is known as capital that is used to fund a new business or enterprise. This funding falls under early stage financing and helps companies take their first few steps into the world until they’re fully running and reaping returns on investments.
Statistics are showing that between 29% and 94% of new businesses fail to take off because of problems with funding. Having enough capital is important to stabilize the company in its early time period and counteract any losses or do damage control.
Before You Seek Seed Money
For every entrepreneur, there’s an eager investor looking to partake in that novel venture, and with low cost of entry into the market, tons of funding resources are available out there.
But before you actively find seed money to begin your start-up, it’s important to evaluate your business goals. It’s also important to work out the feasibility of your company’s success post 3- 5 years from the initiation, and a well thought out plan helps new entrepreneurs figure out how to tackle obstacles that may occur financially or otherwise.
The Golden Question: How Can I Raise Seed Money?
Luckily, there are various ways to begin.
A Friendly/Familial Loan
Asking a family member or a close friend with sound capital resources and a sharp idea for seed money is a great idea. Not only will you be avoiding the interest pile up, as is the case with bank loans, but you’ll also have a team of investors you can fully trust.
Understand that you must establish some rules if you choose to take seed money from family; maintain utmost professionalism and treat them like you would any other investor.
Here’s how crowdfunding works: An eager entrepreneur will pitch his proposal to a large mass of a funding platform, detailing his goals, plans and requirements. Those who are interested will either donate or sign pledges to make a certain amount of purchases from you.
Not only is this a great way to test out your consumer market, but it’s also a great way of increasing interest and awareness.
Seed Venture Capital Firms
If you’re planning to aim high, here’s your chance to really polish up your business proposals and get legal advice before you begin finding seed capital venture firms. Being accepted and noticed by one takes a good amount of hard work and tons of effort; however, be prepared to deliver a large equity stake than you normally would have.
Angel investors invest a portion of their existing wealth in an entrepreneur’s new business. If your business is a risky one, these investors are one of your best options. You don’t even have to show any research or metric to get them on board; they simply invest in an idea.
Your seed capital not only comes in financial form, but angel investors like doctors, lawyers and existing entrepreneurs, also step up to mentor you.
A convertible debt is a loan that you and your existing investors will convert into equity at a specific date and time. This source of funding helps to delay the debate over the value of a company and also reduce the risk of losing all funding at once. Although, it does increase the time frame of interest piling up.
Your seed money can come directly from you. However it depends on how quickly you can manufacture products and how successfully they sell.
Assuming the first stage goes well, you can use that profit and revenue and reinvest it back in your company. If the product takes well, you’re on your way to establishing a very stable company with flowing revenue to reinvest time and again.
Online lenders are the new banks who are willing to lend seed money to small start-ups. With a screening process and a simplified application to fill, it’s one of the easiest ways to procure capital.
This quick process has the advantage of dividing one large lump sum into smaller loans for a steady influx of money, which reduces the risk of loss. However, there is an upper limit of lending when it comes to online lenders.
Corporate Seed Funds for Small Start-ups
Many mature companies are beginning to give back to the smaller fish. Offering handsome seed investments to small start-ups is a great way to encourage innovation and entrepreneurship. However, your business model needs to agree with what the board of the corporation is inclined towards, although your chances of being acquired as a candidate grow.
Incubator Seed Funding
Helping to facilitate local businesses, these accelerator companies offer specific programs for a fixed period of time for entrepreneurs to take on and implement. Not only does this guarantee a great network and working experience, but it also gives you a chance to learn about the ins and outs of the corporate world and finance.
Are You Ready?
Starting a business can be an extremely rewarding and exciting adventure for new business owners. Making the choice to start a business is a decision that requires a lot of thought, effort and responsibility and although this can be the most exciting time in a person’s life it can also be very complex and tiring as well.
As an entrepreneur, you must begin to think about how you are going to get your small business started. One must realize that with starting a business comes a laundry list of responsibilities that you are ultimately in charge of handling. A business owner must think about choosing a business structure, marketing your business, developing a business plan, hiring and training employees, and much more.
This creates a set of challenges that make it difficult for the business owner to focus on sales and profitability. It can be difficult to balance the many different responsibilities especially since your small business is just developing. Often times the reason businesses fail isn’t due to the lack of passion, involvement and a vision, but because of poor planning and execution of business management.
Fortunately there is good news when it comes to small business startup and that lies with BizCentralUSA. BizCentral operates as a business start-up center that offers over 30 services and solutions to help put your mind at ease as you start your business. We can help make this process less intimidating for you which will give you the time to focus on generating revenue, while we take care of your back office.
If you’re ready to embark on your new business venture, we wish you luck. Professional advice from BizCentral USA has helped entrepreneurs begin fruitful careers with sound financial advice and great strategy management. Trust the experts at Biz central to guide you through your first of many small start-ups.