Seed Funding at Ideation Stage – Things a StartUp Must Know

Imagine a StartUp scene where an entrepreneur, a couple of them or a large group are sitting and discussing a wonderful business idea. It’s not surprising that many StartUp ideas are born out of casual discussion or life events. The idea lights up in the brain and within a few weeks or months the entrepreneur(s) is on the drawing board or laptop and working on the idea. The fact that most StartUp entrepreneurs are in their 20s and 30s isn’t surprising as it takes lot of energy and the ability to come out of the comfort zone.

Initial StartUp journey isn’t as fancy as it may seem if you have been reading biographies of successful entrepreneurs. For every Google there are thousands of others who didn’t go beyond a website. Thousands of social media and networking sites don’t make a second Facebook. Often your success rests on your first steps and it all starts with funding. It not only gives you the money required to work on your idea but also motivates you to aim higher. So let’s take a look at some of the things you need to know about Seed Funding at Ideation stage and what can improve your odds.

Look Near You For Seed Funding

At the Ideation stage you aren’t likely to attract an Angel, VC or even Crowd Funding. Remember your idea is one among millions in the world and it is here that you need to approach a person you know. There are two benefits of doing this – you would be comfortable presenting your idea to a family member, a friend or a friend’s friend and secondly they would listen to you without intimidating. Both these put you into a confident frame of mind. If you can’t convince near and dear ones you are unlikely to convince anyone.

Create An MVP (a Model/Concept/Website/Prototype)

Compare two sales pitches – “I/we plan to do so and so…” and “I/we have built this prototype/model/concept and have already launched a website…”, which one do you feel would work? The problem with an idea on paper is the fact that it competes against thousands but when you have a model, concept or prototype which is called an MVP (Minimum Viable Product) you are competing against hundreds thereby improving your odds. Understand that the chances of an investor’s money going down the drain on your idea are a few multipliers of its earning healthy returns. If you don’t even invest your own money on an MVP or at least a website that talks about your idea why should the investor do so?

Don’t Jump Into Valuations

It is good to have the aim of being the next Google or Facebook but it is equally bad to tell your investors that you have a billion dollar idea for them. This is a cardinal sin at the ideation stage as your product or offering has neither been operational nor been tested in the market. Investors are much smarter than you when it comes to judging valuation of the company. What you need to focus on is to raise maximum capital by parting with minimum equity. Leave aside the valuation topic for another day.

The bottomline is to focus on adding value to your idea at the ideation stage and build models and prototypes to get attention of your investors.