The Miami tech ecosystem is booming, building a movement that seems unstoppable, attracting founders and investors as well. News about startups based in the area succeeding at funding rounds shows up every week, encouraging other entrepreneurs to take this significant leap.
However, even though seed funding is crucial on the lifecycle of any early-stage company, the truth is that it also entails multiple challenges. The biggest one, perhaps, is convincing investors to pump money into a new venture. But behind this major concern, there are other relevant aspects that you should consider before raising capital.
Therefore, if you are in the quest to raise seed funding for your startup but don't know where to start, keep reading to learn the hints to skip uncertainty and scale your project.
First Things First. What’s Seed Funding?
Ideas need more than potential to flourish. They require a kick-start to put in motion the business. And unless you are a high roller that can grow its company by bootstrapping, you'll need a capital boost from investors. Seed capital is an investment focused on helping early-stage startups grow, giving founders an influx of capital to validate their ideas in the market.
This is what makes seed funding so challenging, as it entails a combination of high risk and uncertainty. Long story short, capital is used to start the engines of the company that hasn't validated itself within the market.
So, where can founders get these funds? While a small fraction of entrepreneurs may look for bank loans, Angel Investors are usually the most preferred option, but that's not the only one. There's a wide array of seed funding options such as crowdfunding, accelerators and incubators, and even friends or family.
And even though VC funding is occupying most headlines in the news lately, the truth is that these firms typically don't invest in early-stage companies. In fact, they are more focused on Series A+ funding rounds rather than seed stages.
When Should You Raise Seed Funding For Your Startup?
Choosing the right timing to raise seed capital can be puzzling. There are a series of aspects that you must have in place before raising funds for your early-stage startup. Having a solid business plan is the cornerstone of every company, so this must be the first item on your to-do list before seed funding.
Then, you also need to have figured out what's the gap you plan to fill in the market and develop a Minimum Viable Product (MVP). This is a basic version of your product with enough features to validate it (or not) in the market by early adopters and get the feedback you need for further development.
Therefore, you must have some traction in the market before a seed funding round. So, once you are sure you have these aspects in place and your business has what it takes to guarantee a good ROI for investors, you are all set for fundraising.
How To Raise Seed Funding
#Determine How Much Money You Need To Raise
Deciding the amount of capital to raise depends on each company. However, as a general principle, founders should raise enough money to reach profitability, and this is why having a business plan is essential to start the fundraising process. You must outline financial projections, and also variables such as the cost of customer acquisition, retention, etc, to determine how much money you need to raise.
#Choose The Most Adequate Funding Source
As we mentioned, there are multiple funding sources for early-stage companies. Friends and family are usually the first options as it entails more flexible terms, which makes it a common source of capital. Next, there's also crowdfunding with many popular platforms like Kickstarter and Start Engine.
This system offers reward and equity-based crowdfunding, which means that investors can opt for discounts and merchandise or a share of equity for their investment.
And finally, Angel Investors, which are by far the most preferred option for founders, are individuals that provide financing in return for a share of the startup's equity. They can provide significant amounts of money for the early stage. But as investments in these stages encompass high risks, they will also ask for an important equity share. Therefore, you'll have to drill down the funding options and analyze the pros and cons of each according to your business needs.
#Create A Compelling Pitch Deck
The key to a compelling pitch deck in your demo day is clarity and concision. Investors see a parade of founders with good ideas every week, and what's more, the average attention span is relatively narrow. Therefore, the intricate part is to make investors see the full potential of your product.
That's why you need to cover your business essentials with a powerful pitch deck, dazzle investors and get the capital injection your startup needs. Ditch presentations with endless slides full of irrelevant information. Focus on the problem, the solution, and your business model. Learn more tips and tricks to wow your audience with an effective pitch in the article below.
Related Read: How To Dazzle Us Investors With A Wow! Statement
#Get Support From Incubators/Accelerators
Support for incubators and accelerators is key for any early-stage startup. Their goal is to guide entrepreneurs in the company's development process and provide them with the necessary resources and tools to scale the business. Both can give small seed investments, but it's not their primary purpose.
On the one hand, incubators can help founders in the early stages shape their market-fit plan. On the other hand, accelerators work in scaling startups that are already in motion. Moreover, accelerators are a great source for founders who look to expand their companies to international markets. They offer great networking opportunities, mentoring sessions, can get you in touch with investors, and also can provide legal and financial advice.
Is Your Startup Ready To Take The Leap?
Do you think your startup has what it takes to take the next step in its lifecycle? Raising seed capital is a cornerstone for every company, and outlining a strategy following the steps above can give you a clearer panorama to get the money inflow you need. A solid network and support from those who have already paved the road are essential to succeed at fundraising.
That's why at Base Miami, we support founders on the international expansion journey of their companies through different programs, helping them save time and money on the process. Get in touch with us today, and let's work together!
