Recently updated on April 15, 2024
We have had our experiences with startups and are well-acquainted with the investment hassle that surrounds emerging companies. People who know nothing about the specifics of startup investments may get confused with all the surrounding terminology: seed funding, early-stage funding, round A, round B.
This article answers the questions, “What is seed funding?” and “How Seed funding differs from early-stage funding?”
Seed Funding
To put it short, seed funding is the first money you receive from investors to kickstart a business.
So, you have a great idea, perseverance, stubbornness, and determination to make your dreams come true. The only thing you lack is money. It’s ok. You should not work two full-time jobs, look for side gigs, and limit yourself in food and Netflix subscription to accumulate enough money. What you should do though is take your idea to investors and prove to them that it is worthy and relevant. (The best way to do so is to create MVP, which is way cheaper than a full-scale product and way more persuasive than a power-point presentation) Investors who will see potential in your idea will give their money for the share of your business. This very first money that you receive as a result of a successful presentation would be a Seed round.
Here, we want to mention that “investors” could be not only established businesspersons but your parents who have enough money and believe in your project.
Early-stage Funding
You already started the company, you have some users, and you realize that it is time to expand a little by adding employees and scaling up the production (adding servers, new functionality, etc). If you already receive profits from your product, they might not be enough to cover up the expansion of the company. Again, there is no need to look for an additional job; you don’t have any free time left anyway. Therefore, it is time to start the early-stage funding campaign. Early-stage funding consists of two parts:
1) Series A, which helps with the first expansion. Usually, series A brings more money than the Seed round. During A round, you need to have an actionable business-development plan that will increase the revenue.
2) Series B kicks in when the company already has its market fit, receives profits, and requires another expansion to keep up with the competition and demand. The funding is higher than previously but requires forecasting of future profits to get the attention of investors.
Conclusion
Starting a business is an expensive and risky endeavor, and investors can help you make the process much smoother, safer, and more comfortable for you. The only thing that you need to get their support and money is to show them what you already know – your idea is worthy and has great potential. The best way of doing so is to conduct a thorough business analysis of your project and develop an attractive MVP. You can do it yourself or find a company that has the required expertise and experience. Either way, the future of your idea is in your hands and the hands of your partners. Be confident and plant those seeds!