5 Things You Need To Do Before Approaching Investors For Seed Funding

Capital, seed funding

You have this great idea you want to develop into a business. The idea seems perfect. You think you have the project all figured out. It’s a dream you want to see come to reality. However, there is always this big hurdle, how to get the requisite funding to drive that moneymaking idea you have. Taking a loan is a risky undertaking. Opting for seed funding is even riskier as you would be held responsible if anything should go wrong. That’s why you should be doubly sure of how viable the venture is before you begin.

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Seed money, sometimes known as seed funding or seed capital, is a form of securities offering in which an investor invests capital in a startup company in exchange for an equity stake or convertible note stake in the company.

Funding seems like the greatest challenge for many, if not most aspiring entrepreneurs. But truly, is it? That’s what we think until we get the required capital and still, the business isn’t doing so well.

It is a common thing to hear many aspiring entrepreneurs complain about a lack of funds to implement a business idea. However, money isn’t the first thing you need to start a business, neither is it the most essential. There are other things you need to put in place before getting to the issue of funding.

If acquiring capital is the greatest challenge you have to kick start your business, then your idea may not be lucrative enough. For starters, the best business ideas can also do well with little or no startup capital.

Most successful businesses didn’t start so big in one day. They didn’t require such a huge capital at startup. Yes, some do, but attracting capital to finance an idea that seems very lucrative is not such a difficult task.

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Before you begin, you have to ask yourself these questions and answer them to your (personal) satisfaction.

What problem are you solving?

How lucrative or convincing is your startup idea?

Who else is doing it?

How confident are you about this startup idea?

Have you developed a clear vision of how you intend to grow this business?

How fail-safe is the startup idea?

If you are satisfied with the answers to the questions above, then you can proceed to the more trickier part: how to raise your startup capital.

Here are some tips to help you in that regard.

Be realistic

There are certain things you must have in place if you are toying with the idea of starting a business. First, you need a steady source of ‘survival income’ for any business startup. Don’t be in a hurry to quit your current job. Your job offers you the financial security to take risks and insulates you from additional expenses that may be required at startup.

Work on Your Business Idea

Coming up with a great business idea is just the first step on the journey to became an entrepreneur. There are many more things you need to do before you get started.

Fleshing out your business idea is one of them, and it’s very critical to the success of your venture.

How unique is your business? Does it stand out from the rest? What extra value will the new venture generate? Is it something your target audience will love? The answers you will get to these questions will determine whether your idea will work or not.

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Find out about your competitors

Yes, you have such a brilliant idea that seems so perfect, but have you taken the time to study and analyze your market? How much information do you have about your competition? Potential investors will ask you these questions when you approach them for funding. It is an added advantage for you if you forearm yourself with first-hand information about the market you are going to operate in. Study the trends and identify the possible challenges you are likely to face. An understanding of how you are going to surmount your likely challenges and at a less cost will determine how profitable your business will be.

How much capital do you really need?

Every business requires startup capital, but how much money do you really need? Without a concise valuation of your business, no investors will risk giving you a loan or investing their money.

So before you start worrying about raising capital for your business, you must asses your funding requirements to know exactly how much you need.

Explore the Crowdfunding option

Crowdfunding platforms like Kickstarter are helping entrepreneurs raise capital to fund their businesses. Crowdfunding will get people to invest in your business. However, you should note that your idea can be stolen and better packaged by other entrepreneurs. Do not reveal too much information about your idea. Keep certain vital secrets of your proposed business close to your chest.

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Connect with the right people

Networking with the right people who can help is essential when you don’t have money to start a business. Get social, attend events and trade shows where can meet potential investors.

Always explore ways to engage everyone else and be more intriguing, generous and kind.

Also, do not underrate the power of social media. Join groups and forums and interact with others with like minds.

Most venture capitalists and investors are quite active on social networking sites, so if you can wow them with your idea you may find a great way to get started on your business dream.

Put your idea to a test

The surest way to find out if your business idea is unique is by putting it to a trial. The pilot experiment will give you the confidence to take things to the dream level. You can experiment with your business idea by starting on a small scale. You can also dole out some freebies from time to time to your target audience and watch how they respond.

A trial gives you insight into your business and helps to identify the challenges you will encounter at startup.

Gather Feedback

If you are planning to get into a completely new business, it would help if you got a second opinion from someone who knows the market and the challenges involved.

A business idea that looks good on paper may not be that attractive when you get into it. An expert’s opinion may help you look at things from a different perspective and gain more knowledge that you may lack.

Secure a Loan if Necessary

This is the trickiest part. There are several loan schemes run by banks, but you shouldn’t apply for just any loan. Moreover, the tight lending standards by banks makes it no easier to obtain a startup loan. Finding, applying for and getting approved for small business loans can be difficult.

But before you apply for a loan;

Ask yourself, how exactly will this loan help your business?

Do thorough research and find the type of loan you require.

Research and find the best lender.

Study carefully the terms and cost of each loan.

Select a business loan based on your specific needs.

See if you have what it takes to qualify for this type of loan.

Get all vital information handy including your credit score and annual revenue.

Get your documents ready and you are good to go.

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