Raising seed funding is no walk in the park; it takes patience, understanding, and a solid business plan to even get the attention of investors. Without a doubt, securing seed funding can be extremely difficult and it can be difficult to understand exactly why. In this article, we’ll take a deep dive into the reasons why it can be difficult to get angel investors to throw money behind an idea.
Understanding the Seed Funding Landscape
Before jumping into the why behind raising seed funding, it’s important to have an understanding of the seed funding landscape. Seed funding is normally the first round of money provided to a new business or startup and can be used to launch products or ideas, hire staff, and even fund marketing activities. Normally, seed funding comes from angel investors or venture capitalists who have an interest in ensuring the success of new businesses or ideas.
Common Barriers to Raising Seed Funding
So why is it so hard to raise seed funding? Let’s examine these common barriers:
- Lack of investor confidence
Raising seed funding is difficult because investors want their money to go towards something they know is going to be successful and make a return on their money. Often, when pitching new ideas to investors, it may not be immediately clear how that idea is going to make money, leading to investors being hesitant to commit money towards the project.
- Unclear business model
Part of raising seed funding involves having a clear, well-thought out business model that is capable of turning a profit. If the business model is not well thought out, or, worse yet, if there isn’t a business model in place at all, it will be difficult to get investors interested in taking a risk.
- Poor market analysis
Any great business or idea should be backed by solid market research that demonstrate the potential for growth within that market. If the market analysis is insufficient or does not clearly demonstrate potential for growth, it will be difficult for an investor to feel confident about the proposal.
- No track record
For investors, there is nothing more important than being able to trust the people behind the business. If there is no track record of success and credibility, it will be difficult to convince investors that the idea or business is worth investing in.
- Lack of passion
Raising seed funding is all about inspiring other people with your ideas and showing them why they should invest their money in your project. If there isn’t enough passion behind the project, it will be difficult to get the attention of investors.
Best Practices For Raising Seed Funding
Now that we’ve identified what might make it difficult to get seed funding, let’s examine the best practices that can be used to make it easier:
- Develop a strong business plan
Having a well thought-out business plan is key when it comes to raising seed funding. Not only will it demonstrate to investors that you’re taking the project seriously, but it will also provide a clear road map to success. Make sure the business plan contains information about the market analysis and the potential for growth, the team, and the revenue model.
- Have a well-rounded team
Having individuals with both technical and business skills can give investors additional confidence that the business or idea is feasible and viable. Make sure to have a strong team with a track record of success in order to give investors an additional sense of comfort.
- Build relationships with potential investors
Rather than just pitching investors out of the blue, make sure to build relationships with them first. This can help to legitimize the project and demonstrate that the team behind the project is reliable and worthy of investment.
- Know the numbers
It’s important to know exactly how much you’re looking to raise and what return investors can expect. Giving investors a sense of the potential success of the project can increase their confidence in the project.
- Pitch, pitch, pitch
The key to raising seed funding is being able to pitch like a pro. Investors will want to hear a pitch that is composed, succinct, and of course, exciting. Make sure to practice the pitch before giving it to potential investors, so that there are no surprises.
Raising seed funding can be a challenging process, and it’s important to understand exactly why it can be difficult. By understanding the common barriers and following best practices, the odds of successfully raising seed funding can be greatly improved. With the right attitude, research, and enthusiasm, raising seed funding can be much easier than you might expect.