Seed fund, barring a few early stage startups, is usually put in by the founders. The typical cycle starts with you having an idea that you believe can change the world. So, you get a team in place that you believe can help bring the idea to fruition. If you are lucky, the founding team that you bring in possess a set of complimentary skills that helps your venture sustain the talent crunch in the initial days. If you are even more lucky, then in addition to their time, your founding team also brings along some seed capital.
Now, if you and your founding team are experienced professionals, chances are your seed fund will be relatively larger, considering the time you had to replenish your savings. However, if you are in college or just graduated from it, savings is usually a term that your parents have been advocating for some years but never put into practice. So in that case, how do you fund your dreams? You end up doing what a lot of young entrepreneurs do – you borrow money from friends and family. Now, while some startup ventures require less upfront investment and running costs than others, but even a steady cash flow is advisable for when things do not go according to plan (and they rarely go in the startup world).
The second important consideration in a young startup’s life is reaching out to the right set of customers. This is especially cumbersome for businesses that target enterprises/other businesses, considering the high customer acquisition cost involved. Let’s consider a scenario – as a startup, you managed to attract high performing founders, pooled together a reasonably adequate seed fund, and started work on a prototype product/service. Since you do not have the time or the resources to undertake market research, you have no way of knowing that the prototype will have the constituents that your customer desire. What further complicates the situation is that at the prototyping stage, it is always a risk to reach out to enterprise customer, as a wrong step and you end up losing that account for good. So, how do you get the required inputs in time so as to make the corrective measures?
The third important consideration, which goes hand in hand with seed fund and product feedback, is the quality of your network. Here, network refers to the people…