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MenuHow can I obtain seed funding to build MVP and prove a concept?
Have seen that crowdfunding is a challenge because you still have to pay lots of $$ to send traffic to the page to even be seen. Also, concept is an online service so not much to give as gifts for contributions.
Answers
Ask your parents.
I know that sounds glib, but honestly in today's rich technology access landscape you should be able to build a prototype of anything for free or at least under $50. In many cases you don't even need to know how to code.
Here are some examples:
SiteGround - Wordpress hosting plan: $3.95/mo
Install Wordpress: Free
Web template: Free (or spend a few bucks at Elegant Themes - I love them)
Add WP tools: Free mostly, some cost a tiny bit
Need a DB for CRM, planning, scheduling, other? You don't even need to know how to create one or connect it. Airtable.
I could go on and on. Chatbots, marketing tools, selling/ecom, webinar tools, etc.
Nobody but your mother will pay you to do what anyone else with a spoonful of hustle will do on their own.
That said, once you do have a prototype THEN you have something that could be interesting to angel or seed level VC investors. And we can really get into how to succeed at that.
If you have more questions, let's setup a call. I've built a LOT of prototypes. I've built and run 3 startups. I mentor founders almost every day of the week. I can help.
There are platforms that allow crowd funding for websites. However, you touched on a very specific point, that even I myself am currently facing. It costs money to get awareness to raise money. So, the best thing to do is narrow your focus for the MVP. Focus, on the most critical problem-solving aspect of your product for the consumer, from there build that, you should significantly reduce your build out costs by doing that. And for the answer the easiest way to get funding is either pay for it yourself (i'm currently doing it, so I understand the pain), or ask friends and family. Also, a huge take away, remember to be mindful of what you are asking for in terms of money. You aren't asking for investment, per say, but more for money to develop the platform. The reason I bring this up, despite what we may feel and think, as the platform does not have clear market fit, we do not have a true way of returning that investment money as of yet.
For more help, call me buddy!
You will be surprised to search out that, in fact, an MVP isn’t just unnecessary, it may also be hindering some when pitching investors.
First off, let’s see what the core difference is between pitching with an MVP, and without it, in terms of the expectations it sets for investors, and what it means for you.
When approaching investors, you ought to bear in mind that there are several risks they consider:
Team risk: Is your team competent enough to create and run the business?
Market risk: is that the market large enough or growing fast enough to be considered promising?
Timing risk: Is it the correct time to enter the market?
But there’s an excellent more important issue – product risk: are you able to convert your business idea into a product vision?
This includes the product’s ability to come up with revenue, to resonate with a particular audience, and its usability and value.
For you, there are two ways to eliminate product risk:
Sell the business idea and merchandise vision – demonstrate that you simply know exactly what you wish, a way to build it and the way it's visiting generates revenue.
Sell the results – demonstrate that your product works and is ready to get revenue.
Just like one plant a seed and nurture it from a sprout to a plant, a startup also requires proper nurturing, and that's where seed funding comes into the picture. The timing of raising seed money can have a huge impact on the outcome and before deciding on the appropriate timing, founders and entrepreneurs need to be prepared with a meticulous business plan, market research and roadmap for product development.
You can read more here: https://inc42.com/fundraising-101/how-to-raise-seed-funding-and-angel-funding-for-startups-india/
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Related Questions
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What happens to a convertible note if the company fails?
Convertible notes are by no means "earned." They are often easier to raise for early-stage companies who don't want to or can't raise an equity round. Equity rounds almost always require a simultaneous close of either the whole round or a defined "first close" representing a significant share of the raised amount. Where there are many participants in the round comprised mostly of small seed funds and/or angel investors, shepherding everyone to a closing date can be very difficult. If a company raises money on a note and the company fails, the investors are creditors, getting money back prior to any shareholder and any creditor that doesn't have security or statutory preference. In almost every case, convertible note holders in these situations would be lucky to get pennies back on the dollar. It would be highly unusual of / unheard of for a convertible note to come with personal guarantees. Happy to talk to you about the particulars of your situation and explain more to you based on what you're wanting to know.TW
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As a startup, is it better to find a way to pay for services (i.e. design) or trade equity for it?
Before I get to your question, let me give you a tip: always aim settle questions of payment before the work happens. It is ten times easier to agree on a price beforehand, and having done that doesn't stop you from changing it by mutual agreement later. The problem with paying cash is pretty obvious: you don't have a lot of it. The problems with paying equity are subtler. The first one is that early-stage equity is extremely hard to value. A second is that equity transactions require a lot of paperwork. Third is that entrepreneurs tend to value their equity much higher than other people would; if not, they wouldn't be starting the company. And fourth, people like designers are rarely expert in valuing businesses or the customs of of startup equity valuation. In the past, I've both given and received equity compensation, and it's a lot more of a pain than I expected. In the future, what I think I'd try is convertible debt. That is, I'd talk with the designer and agree on a fair-market wage. E.g. 100 hours x $100/hr = $10k. The next time we take investment, the $10k turns into stock at whatever price we agree with our investors, plus a discount because he was in before the investors. Note, though, that this will increase your legal costs and your deal complexity, so I'd personally only do this for a pretty significant amount of work. And I'd only do it for somebody I trusted and respected enough to have them around for the life of my business.WP
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Business partner I want to bring on will invest more money than me, but will be less involved in operations, how do I split the company?
Cash money should be treated separately than sweat equity. There are practical reasons for this namely that sweat equity should always be granted in conjunction with a vesting agreement (standard in tech is 4 year but in other sectors, 3 is often the standard) but that cash money should not be subjected to vesting. Typically, if you're at the idea stage, the valuation of the actual cash going in (again for software) is anywhere between $300,000 and $1m (pre-money). If you're operating in any other type of industry, valuations would be much lower at the earliest stage. The best way to calculate sweat equity (in my experience) is to use this calculator as a guide: http://foundrs.com/. If you message me privately (via Clarity) with some more info on what the business is, I can tell you whether I would be helpful to you in a call.TW
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What exit strategies do angel investors want/prefer for a service business?
Keep in mind that investors invest for returns. Telling a prospective investor that you want his or her money to grow your business but don't plan on ever generating a liquidation event that pays him or her a dividend is not likely going to work; angel or not. You may be better served with debt financing where returns are generated in the form of interest payments not equity value growth. BUT, if equity financing is the plan, you're going to want to develop a strategic exit plan right from the start. That means identifying prospective buyers, strategic channels etc and characterizing the value drivers for each right up front. You'll find prospective buyers come in a number of forms; competitors, bigger versions of you, strategic partners, private equity, etc. Each will value your business in different amounts for for different reasons. Understanding this is vitally important for you to navigate to securing the right money, from the right sources, with the most favorable terms. Once you've qualified and quantified each of them, then determine what (specifically) you're going to need to do to align your business with those prospective buyers generating the highest returns. This will drive your business model and go to market strategy and define your 'use of funds' decisions. This in turn result in a better, more valuable business whether you exit or not. Do it this way and you'll have no trouble raising money from multiple sources. You can learn more about the advantage of starting with a Strategic Exit plan here: http://www.zerolimitsventures.com/cadredc Good luck. SteveSL
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How much equity is typically taken by investors in a seed round?
From my experience I would not advise you to go with Venture Capital when you're a start-up as in the end they will most likely end up screwing you. A much better source for funding would be angel investors or friends/family. The question of how much equity should I give away differs for every start-up. I remember with my first company I gave away 30% because I wanted to get it off the ground. This was the best decision I ever made. Don't over valuate your company as having 70% of something is big is a whole lot better than having 100% of something small. You have to decide your companies value based on Assets/I.P(Intellectual Property)/Projections. I assume you have some follow up questions and I would love to help you so if you need any help feel free to call me. Kind Regards, GiulianoGS
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