Initial/Seed Venture Capital for Beginners

Brave the wild frontier of the free market: initial/seed venture capital for beginners

Looking for seed money for venture capital? Afraid of loan rejection from your local bank? Seed capital firms abound, but prepare yourself for a potentially wild ride, as you may get considerably more than you bargained for, as seed capital investors have their own best interests at heart.

While a bank or SBA loan generates a flurry of red tape at the beginning of the credit process, these institutions typically don’t care what happens to you or your company as long as they receive regular payments. Seed capital companies don’t have government guarantees backing up their loan; if you fail, so do they. So expect initial/seed venture capital to arrive with considerable strings attached, typically throughout the major stages of your business.

1. Seed capital for startups through the incubation stage

2. Larger capital infusions and executive management through early to mid stages of growth

3. Final exit when you get conventional funding and the VCs leave

 

Get off the ground on angel's wings with seed capital

Experts consider your venture "seed" stage if you have a promising idea or opportunity, but no defined business structure, partners or complete management team, much less measurable revenue. Seed venture capital is typically in the mid-five to low-six figure range, too small for major venture firms to bite. Look beyond friends and family to Angel Investors-individual venture capital investors that front the seed money needed to start a business. As they act alone, there is no overhead, no backing consortium of investors, and so they can focus more on helping you succeed than on recouping their investment. Don't be fooled by the name-they're not soft-edged cherubs you can push over; get ready to be thoroughly grilled by these investors should you choose to use their capital.
Try: Peruse this site of San Francisco investors banded together as The Angels’ Forum. ARCH Venture Partners specialize in coming along side and co-founding the startup from initial concept.

Master the ABCs of initial venture capital through funding rounds

You've demonstrated your concept works, you have management in place, and the revenue stream is at least trickling in. At this stage, a seed venture capital firm will put up more than money, although raising a couple of million dollars through "alphabet rounds" (dubbed Series A, Series B, and so on) is significant. Venture capitalists also will play an active role in management, perhaps even a position on the board or executive level. This protects their investments and provides you with industry expertise to navigate your firm through a fragile phase in its overall development.
Try: A seed capital company will either invest by industry such as Asset Management Company, which has invested seed capital in telecommunications and life sciences startups since 1965, or by geography such as Blue Rock, with offices in Delaware and New Jersey, concentrating on companies in the Mid-Atlantic region from New England to the Carolinas.

Exit from seed capital funding with the right strategy

Just like conventional loans, venture capital for startup businesses has an end date. A seed capital firm will invest in your company only if convinced they'll see their money returned at the end of a set term. The exit scenario can look something like offering your company stock to the general market in an IPO, or perhaps they will look for a merger or acquisition-perhaps even with another company in their investment portfolio.
Try: Check out G-51’s entrepreneurial venture capital business model that matches seed ventures with existing companies in its portfolio to ensure success. Murphree Venture Partners works with mid-stage companies across the Sun Belt.

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