Startup founders who are bootstrapping their businesses often dream of the day that they shake hands with an investor and strike their first funding deal. Unfortunately, the majority are never able to raise the seed funding they need to survive. Although 28 million businesses operate in the U.S. today, only 0.05% of them are ever able to secure funding from venture capitalists.
For those who are able to strike a deal, however, the odds of long-term success increases substantially. Businesses that raise seed money are able to grow faster, expand more rapidly, and are more likely to secure additional financing deals in the future. Seed funding isn’t an end goal, but as a first step, it can give startups a major advantage.
In the most simple definition, seed money is the first round of capital a new business is able to raise from investors. Typically, this funding stage comes after the bootstrapping stage, and after investments have been made by family and friends.
In this stage, angel investors or venture capitalists will invest their money into a business in exchange for equity in the startup. Before funding a business, these investors consider many factors including the business’ current valuation, the size of its serviceable market, its effectiveness in solving a real market problem, and its future projections.
By the time a startup is ready to approach seed investors, they should have already achieved several milestones. A skillful and committed team should be in place to prove to investors that there is enough experience to drive the startup to success. A product, even in a minimal state, should already be built and in the hands of consumers. Finally, the startup should have already gained traction – whether it be revenue, users, or even brand popularity.
To display how effective funding can be to your startup, ThinkLions created an awesome visual that details the amount of seed money that was raised by some of today’s top startups. Furthermore, it showcases how many founders were on the team when they raised their seed investment, and how much they have been able to raise since. Will your startup be next on the list?