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What You Should Know About Early Stage Funding

Be prepared to reach your next round!

101 Early Stage Fundraising for Startups

The majority of startups fail to take off, despite the fact that they are typically built around an original idea or product. 

Finding sufficient funding, especially these days, is a challenge for many companies. CB Insights listed it as the number 1 reason why startups fail, so pay attention! In this article we look into how to get seed stage funding right.

Understanding Early Stage Funding

In its simplest form, seed investment is cash from any source that assists in launching a firm and moving it into the stage of the company where concepts become realities. 

This is not a loan. In exchange for their capital investment, business owners typically give investors a piece of the company’s ownership and/or a portion of its revenues.

When should a startup raise seed funding?

It can be challenging to decide when to raise initial money for a firm. There is no right or wrong answer here. But generally speaking, if you need money to grow faster, prove a concept, or develop a new technology, any time is a good time to start.

What do I need? 

👉You should have a minimum viable product (MVP).

👉You should provide evidence that your concept or product is viable and has a market.

👉Investors should be able to see evidence that there is demand for your goods. In a perfect world, this would mean income, but it may also mean hard data showing consumer interest, such user registrations or signups.

👉Investors want to know if your team is capable of launching this product into the market and growing the business. Investors will need to believe you have the dream team.

💡 Lazo´s pro tip: be prepared for several “we love your idea, but we’ll pass on this opportunity” before the first investment. Never give up, it’s critical to maintain an entrepreneurial mindset and optimism without losing credibility through a foolish idealistic outlook. 

What amount of seed money should you request?

Avoid the temptation to request excessive initial money, but how much is too much?

It is established that the typical seed investment is between $500k and $2m, but still you can search for a smaller angel investor round or approximately $100K. The most important fact here is not the amount but the purpose on how you will use it precisely.

Calculating your current monthly costs and then considering how many months it will take to launch your firm are two solid places to start. What changes will occur to your company over that time, and how will they affect your costs? 

Once you’ve arrived at a value, add a percentage on top to account for unanticipated occurrences.

Conclution 🤓: 

Funding for seed stage capital enables entrepreneurs to quickly implement their novel concepts. The seed stage varies from prior phases in that it involves a larger number of important stakeholders, including angel investors who are more interested in non-ROI aspects of the company.

Before meeting investors, founders should do their homework by coming up with concrete data and assembling a team that will support them when they challenge venture capital firms. Entrepreneurs should naturally be inventive in their approach, and they should never be afraid to add creativity to their presentation.

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