When starting a business, raising seed capital can be a challenge, but there are certain measures you can take to achieve this quickly. By undertaking the steps below you will demonstrate your commitment to your product or service, show that although you may have a vision, you also have a thorough understanding of the details driving your business, and above all, you demonstrate how hard you are prepared to work to make your business a success.
Having a Unique Concept or Product - it is important to communicate to potential investors why your idea is unique. And if your concept already exists, it’s vital to show why yours is a new proposition, how it differs from all other market offerings and why that makes it better than the competition.
Presenting something Tangible - Taking the time and trouble to develop a prototype or example of your unique product or concept, will help investors understand your vision in a practical way. Investors like something they can see, touch and feel. A physical representation of your concept, an MVP or even just a visualisation will win points every time.
A Business Plan with at least a Three Year Projection - It is so important to do your sums and know them inside out. Your investors will need a thorough understanding of where your business will be in 3-5 years and what kind of multipliers they can expect. If you engender confidence in your knowledge of the numbers, and can demonstrate why your projections are realistic, you are much more likely to find investors. Seed investors tend to take a long view, maybe 5-7 years. You may want to write a press release about your startup from the perspective of 5 years hence, to compare against your projections.
Advisory Panel - It’s often said it’s not what you know, but who you know and this is never more true than when starting a business. By surrounding yourself with experts from the industry you’re targeting you’re enlisting the help of the very people who have connections into your market, and will in turn help you find the right investors. If you include experts from across the business spectrum, for example technology and commerce, as well as industry specialisms, this will build confidence in potential investors.
Choose Investors Wisely - Friends and family and angel investors will always be supportive, and less concerned about quick returns on investment, but when you broaden your search, try to find people and financial institutions who can offer more than just money. Try to choose investors with connections, industry expertise, technology expertise, access to future investors, the ability to introduce future customers, anything that will help you scale your business over time. It’s also wise not to put all your eggs in one basket, spread your investors, having at least 3 or more, but be mindful of dilution of ownership early on.
Work Hard on your Investor Presentation or Pitch - I would suggest being highly selective when pitching to potential investors, no more than 15-25 as a closed network, and keep your pitch detailed and short. Try it out on trusted advisors and ensure you know your stuff.
Keep your Timeframe Short - Some seeking seed capital will leave a window of opportunity for investors of as long as 3-6 months, whereas I prefer 6-8 weeks. A shorter window to invest focuses minds and means the whole round of investment can be achieved quickly, with no room for vacillation, letting you get on with moving your business forward.
Plan for More - When you seek to raise funds, calculate the minimum must-have amount and plan for 50% more. In case you do not raise the entire amount, you have an option to close the round once the minimum is achieved.
I’m fond of using real examples in my blogs of how businesses I’ve been associated with, either as a founder or as a supporter, have used the techniques described to achieve success.
My friend Simon Dutta co-founded tryliquidity.com, a Financial Services start-up which aimed to build a reverse invoice factoring business. Invoice factoring is when a third party offers payment up front for an invoice in return for an interest charge. Let’s say a 90 day invoice, they give you the money up front but they will charge you a percentage point for giving you that money, and then at the end of the term you pay the company and they settle the invoice.
Reverse factoring sees Simon offering his services to the Blue Chips, so they can pay the small charge for freeing up cash to their suppliers. Cashflow is crucial to small businesses, and a lack of it presents the biggest single threat to their survival. TryLiquidity unlocks cash trapped in corporate supply chains, offering Blue Chips the opportunity to support small businesses at minimal cost to themselves.
Simon had a vision, a great and unique proposition with swift execution. He had done all the groundwork, had a tangible product vision ready, business plan ready, research ready, had the beginnings of a high quality advisory team and carefully chosen investors lined up. His inspiring product presentation provided all the information the seed investors required and he was able to close a seed capital investment round in 2-3 weeks, having set and exceeded his target, which is very rare. It was the perfect execution with the capital required raised swiftly.
The business is growing with the Minimum Viable Product (MVP) about to come out, which is likely to bring a number of Blue Chips into the business. A well chosen panel of advisors, with excellent industry knowledge and connections have really helped Simon to grow the business. TryLiquidity is now looking to raise the next round of funding, I suspect it will go well and wish him all the best.
About the Author
Ashok Suppiah is co-founder and CEO of the Mitra Innovation Group, a global technology provider specialising in digital transformation, product incubation and integration services. He has been a leading light in the tech industry for over 20 years. A serial entrepreneur, Ashok has started more than 10 technology companies in the USA and UK, notably as a member of Virtusa Corp which sold for US$2Billion in 2021 and as Chief Architect for eDocs which sold to Oracle for US$115Million in 2004.