6 Ways to Get Seed Capital for Your Startup
Every day, it seems another innovative startup has landed millions of dollars in funding, making news and leaving entrepreneurs wondering what they’re doing wrong. Although the media may make it sound as though millions of dollars are waiting for startup founders, entrepreneurs often find they must pitch multiple investors before finding a venture capitalist who is interested in supporting them.
As a startup founder, there are a few things you can do to get the funding you need to give your new business a boost. Some involve pitching investors while others require seeking other types of financing. Here are a few things you can do to get seed capital for your startup.
Study Investors’ Portfolio
Venture capitalists have their own interests in mind any time they listen to a pitch. Most often, this means they’re asking themselves how a particular business would improve their own portfolios. Investors ask themselves three key questions when pursued by businesses for funding:
- The condition of the market in which the business operates.
- The value of any growth in this specific business.
- Whether or not the investment would improve the balance of that investor’s portfolio.
By studying an investor’s portfolio before putting together a pitch, entrepreneurs can design a presentation that answers those questions.
Consider a Personal Loan
Some experts believe that for startups at the seed level, a personal loan may actually be a better option than venture capital funding. Consider asking friends and family to let you borrow the money you need to get started. You’ll have the money you need without having to give up stake in your company. If your business succeeds, you’ll be able to pay the money back as income rolls in. If you fail, friends and family will often give you the time you need to pay the loan back.
In recent years, crowdfunding sites like Kickstarter and Indiegogo have made it easy for new businesses to get funding from the masses. Product-based businesses do best on crowdfunding sites, especially those that command attention by filling a demand. To get started, you’ll need a prototype to demonstrate as part of your campaign, as well as an attention-getting explainer video and a compelling product description. You’ll also need to spend time getting the word out about your campaign.
When it comes to success in pitching investors, many entrepreneurs find it takes a large number of pitches, with only a small percentage interested in moving past the first meeting. Reach out to as many investors as possible but make sure you target those who are likely to be interested in your type of business. If investors find out others are interested in funding a business, they’re more likely to take action.
With so many startup founders seeking mentorship and support, programs have emerged across the country that can help. Startup programs like incubators and accelerators are designed to help professionals network and get the resources they need to start a new business. Even if you don’t land funding directly through the program, you’ll have access to its network of investors and business partners.
Networking brings multiple benefits to new business owners. Through local and industry-specific events, you’ll be able to meet other founders who also seek funding. You’ll share tips and exchange contacts, as well as learn how to craft a pitch and win over investors. If you can locate a networking event where you’re allowed to pitch multiple investors in one meeting, consider making the trip. Even if you have to pay travel expenses, it will save you time you would have otherwise spent preparing and pitching investors separately.
Seed capital can bring the money a business needs to launch operations. While there are more options than ever for startup founders, it’s also important that they take the right approach when pitching investors. With so much competition from other entrepreneurs, business leaders must be more convincing than ever to stand out and win a venture capitalist’s limited funds.
Startups will have their chance to gain exposure and share their ideas at the upcoming IDEA Showcase held Wed., July 20, at Caesars Palace in Las Vegas, NV. The event, held during All About the API, offers a forum for new companies to take center stage and present their innovative ideas and business plans.
Edited by Stefania Viscusi