How To Raise Seed Funding For Your Startup In 6 Steps

Are you about to raise seed funding for your startup but you don’t know where to start? From choosing the right timing, to determining how much you should raise, preparing your pitch deck and preparing investors questions, there are a number of steps you need to follow.

In this article we will go through all the different 6 steps you need to follow to raise seed financing for your startup. They are, in order:

Step 1: Choose The Right Timing

The first step in raising seed funding is to do it at the right time. It might sound obvious but it isn’t necessarily. Getting your venture off the ground or the urgent lack of cash aren’t good enough reasons to go and raise seed funding.

A startup that want to raise seed funding must be at a certain growth stage. Otherwise, it isn’t seed funding but pre-seed (friends and family, etc.). It’s very important to get it right as you might waste precious time reaching out to the wrong investors.

For a detailed explanation of the key differences between pre-seed and seed financing, read our article here.

Choosing the right timing means making sure your startup have what it takes. Among other things, your startup will need to prove investors it has:

For more information on what you need to have before you start reaching out to seed investors, read our checklist article on the 7 must haves for any seed fundraising.

Step 2: Determine How Much You Need

Entrepreneurs sometimes overlook this important point as they wrongly think raising more is always better. It isn’t.

This is very important as it demonstrates investors you have done the work in preparing your financial projections. As such, you are a clear idea of where you want to go, and how much you will need to get there. You also understand what is your runway, breakeven, cash burn and all these sorts of things investors will ask for.

For more information on how to assess much you should actually raise (and why more is not always better) check out our article here.

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Step 3: Pick The Right Funding Source

When you raise seed funding for your startup, you need to know where to look first. This means answering 2 separate questions:

Which instrument should you use?

Are you looking to raise debt or equity? By debt you should actually understand convertible debt: a form of debt that converts into equity under agreed conditions.

2 of the key advantages of convertible notes are the fast access to funds, and the fact that it doesn’t require to set a valuation (which takes time).

With equity, in comparison, you agree with investors on your business’ valuation to determine the percentage ownership you will have to sell as part of the round.

Where to look for funding?

Are you looking for institutional investors, angels or crowdfunding? Each investors have their own processes and requirements. Shooting for all of them is a major mistake, again you might lose precious time whilst you should remained focused instead.

Of course, it’s totally fine to combine some: angel investors and institutions (VC funds) for example. These 2 often invest together. Actually, you will have to find a lead investor (often a VC fund) who will negotiate the term sheet, before other investors jump into the deal.

For a full list of the 7 different investor types for startups, read our article here.

Step 4: Get Your Pitch Deck And Financial Projections Ready

Before you actually reach out to potential investors, you will need to prepare your startup’s pitch deck and financial projections.

Create Your Pitch Deck

There are countless companies, now worth billions of dollars, that raised Series A in the 2000’s and early 2010’s with unstructured and/or poorly designed pitch decks. Unfortunately for you, this doesn’t happen anymore.

Indeed, over the years, VCs have become more and more stringent when it comes to pitch deck.

Make sure your pitch deck looks concise, structured and visually impeccable. If you need help to build a pitch deck for your startup, have a look at our articles below:

Need a Pitch Deck?

Build Your Financial Projections

Your pitch deck will need to include your financial forecasts. Generally, 3 years of financial forecasts are enough for most seed investors, but you can opt for 5 years as well.

Founders sometimes overlook the importance of their financial projections. Be careful: they aren’t a mere tick-the-box requirement. Also, the fact you’re early stage and the future is by nature very difficult to predict isn’t an excuse not to have rock-solid financial forecasts for your startup.

Read our articles below for more information on financial projections and how to build yours:

Step 5: Build An Investor List To Reach Out To

The next step to raise seed funding for your startup is to build an extensive list of potential investors.

First, you need to be aware of the 7 different investor types available to you, and which one(s) are more appropriate for you.

Of course, if you’re going via the crowdfunding route, you only need to set up campaigns on the key crowdfunding platforms. Read our articles on the top 15 crowdfunding websites for US and UK startups.

Instead, if you’re going the VCs or angel investors routes, you will need to create a list of key investors you want to focus on. Start with a list of 30 investors, this will be more than enough as a start, if you select the right investors. Have them by priority as well: the ones you will contact first, second, and so on.

You shouldn’t contact all investors all at once for different reasons.

Indeed, you might learn things along the way: your pitch deck isn’t complete, you haven’t thought about valuation or haven’t prepared enough investors questions for example. In this case, you shouldn’t hit your ideal investors at first.

Also, you don’t want to have too many discussions at the same time: your time is precious and you should also focus on your business.

When it comes to selecting the right investors to reach out to, look for things such as: geography, sector focus, growth stage (if they explicitly do seed for example) and whether you have any sort of relationship within an insider.

Looking for angel money? Have a look at our article on how to find angel investors for your startup.

Step 6: Rehearse & Repeat

The last step before you can raise seed funding for your startup is to rehearse and prepare your pitch.

You should seriously rehearse multiple times your pitch deck so it’s natural. Sure, investors will have your pitch deck in PDF already, yet how you communicate, confidence and body language are very important too. Make a great impression.

Rehearsing isn’t limited to your pitch deck though. Instead, you should prepare key investors questions that may (will) arise during your pitch’s Q&A session.

We have prepared a list of the most important questions investors will ask (and suggested answers), have a look at our articles below:

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