The ‘Roadmap’ section of the Startup Starter Kit is an outline of the background research you’ll need to do and the steps you’ll need to take to get your business from the ‘idea’ stage to a viable business. If you’ve come to this in the wrong order, start with part 1, Finding A Market. This section will discuss how to build a successful seed round.
Timescale: 4-12 Weeks
Success: Closing a seed investment round for £25k-£250k for ≤30% equity.
Failure: Not closing. Re-evaluate your strategy, and go again if it fits.
By now you should have:
A scalable market opportunity
A customer validated product vision
A bootstrap fund that gives you 6-12 months runway
5-10% of your ‘break-even’ user-base
An expert team/board of advisors who validate your idea
A pilot partnership with a scalable distribution channel
Hint: Even if you don’t have these, you may want to start fundraising.
In our experience at Nudjed, this is enough to get positive investor feedback and money to change hands. So, start building your seed round.
Funding is a patchwork, not a whitewash.
It’s unlikely that one person will completely fund your business. In fact, it’s probably desirable to have a few interested parties involved. You get their network and some of their time.
You’ll probably find yourself drawn to one of the crowdfunding platforms who support these kind of deals, by bringing you an audience. We chose Seedrs for part of our seed round.
We liked them because they:
Had the right audience for us (professional services investors)
Had the right structure (shares held in proxy for multiple investors)
Their value aligned with ours (long term growth, with planned exit)
Whatever you choose, make sure they fulfil the above criteria.
Don’t chase bad money.
It’s simple advice to give, but hard advice to follow. Sometimes investment isn’t worth it. You’ll need to continually assess whether a deal is worth it and sometimes, you’ll need to say no.
As an investor friend told me once:
Bad money can put off good money
Have a clear idea of what you want.
What’s the deal you’re offering? It took us a long while to get this clear in our heads. The sticking points will usually be valuation. How much is this company worth? The best advice I’ve had to date on this was:
The business valuation can only be as high as you can credibly defend
Here’s the factors we felt came into play around this:
What’s the value of the opportunity in 3 years?
What’s the cost to get to that opportunity?
How much risk have you removed for the investor?
What are other businesses in your sector raising?
How many funding offers do you have?
How much equity are you willing to lose? (30% per round is a rough guide)
How long is your runway?
How confident are you?
If you’re hyper confident in a busy investment market with a risk-free business and plenty of offers, GO BIG! If not (like us):
Figure out what you can fairly justify to get the seed round you need to deliver your strategy.
Hopefully that makes sense to you.
You can find the previous part of The Startup Starter Kit, ‘Scalable Distribution Channels’, here.
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