When it comes to small business marketing, cashflow is often your central obstacle. You may have the idea, the product, or even the prototype ready, but reaching out to the public can be an insurmountable task without extensive business infrastructure around you, such as a website, shop space, warehousing, production lines and, of course, wages for your employees.
If you’re wondering how other startups made it, the answer is seed funding, also known as angel investment.
You don’t have to be a millionaire to achieve your startup dreams, you only have to acquire funding from investors willing to support your vision.
In return, investors often acquire equity in your company, which means your success is their success. For this reason, good venture capital firms offer not just investors but mentors to guide your business through the early stages, as well as industry links and solutions to evolve your brand rapidly.
In this blog, we will talk about the four stages of seed funding and how to get the most out of each opportunity.
Using the analogy of a tree, the “seed round” is when the first seeds are planted to help grow your business.
In this stage (sometimes called Series A) you may receive the first official money that your business has raised, and use this money to directly invest back into your business to build out its infrastructure.
Things like market research and product development are common at this stage. You may also elect to use seed funds to employ your founding team or rent out an office space.
The seed round should also be used to iron out any problems or concerns about your idea. By the end of the seed round you should have a working prototype.
The key to this phase is reviewing, refining and developing your idea, setting up your basic infrastructure, and preparing your business to viably operate.
Also called the “launch phase”, this is where you switch your business from idea to reality. In short, it’s the grand opening. It’s also a period where you need to wait, observe and learn most.
If your launch was less of a take off than a take two, then this phase is your best opportunity to redirect funding into marketing, new distribution channels, and new markets.
It’s also not too late to address problems or fine tune your product or service. Here, your seed funding can assist in a mentorship capacity and help you make sense of the market.
In the launch phase, you lay the foundations of your later success. Flexibility, compromise and optimism is necessary to overcome those initial hurdles until you have your “jackpot” moment.
You’ll also see the rapid growth of business outlays and infrastructure during this period, what with sales, advertising, tech, support, and more hires.
Series B can appear similar to Series A, in that it is a continuation of the same growth period, and not without growing pains. Here, you need to strike the balance between business stability and business growth.
Your funding mentors and advisors will be indispensable resources at this time, especially in regards to industry contacts and building your business out. The best mentors will impart some of their well-honed judgement as to when to move ahead and when to toe the line.
As your business grows, so too should the amount of interest it generates. Series B is where you go on to acquire additional funding for expansion, and where your business as it stands starts to take on real value.
With a new wave of venture capital, your business is ready for the last phase of seed funding development.
This is the big pond with the big fish. Your business is established, successful and turning a profit. However, business development is never done, and in this phase you have the opportunity to develop new products, expand into new markets and even acquire competitor businesses. This phase is about scaling rapidly and becoming a household name in your field.
Series C is also an opportunity to make your business less risky. To prepare it to be as attractive to investors and the market as possible. Mergers are common in this phase, and is a substantial building out of your business plan. You are almost touching the line of an IPO, so your seed funding and new funding will be shaped by how to best position your business for offering shares.
Think Ten Steps Ahead
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