The initial capital raised by any startup is called Seed Funding or a Seed Investment. In this form of funding, a stake in the company is offered to investors in exchange for their investment. Seed funding is required for many purposes like acquiring office space and other infrastructural facilities, hiring key personnel, development of a product or service and marketing, but most of all, it is essential for the growth of the business. Without such investment, most startups will fail at an early stage.
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An investor will only invest in a startup when the idea is both compelling and unique, and can transition into a successful business venture.
Investors look at a variety of factors when it comes to selecting and funding a startup, like:
An investor will refuse to put his money in a startup which is ill-equipped or inadequately prepared.
Some of the essentials for a startup seeking a seed investment include:
The startup has to focus on making itself legally compliant and professionally managed from the start, during the investment and after the investment. It creates a sense of reliability and trust among the investors. Professionals such as lawyers would be handy guides to startups when it comes to their investment transactions, IPR protection, non disclosures, brain drain, HR issues and various agreements between developer and customers. If all these are in place, it can contribute to the health of the startup Similarly, having a financial consultant would be of great use for budgeting and putting control systems in place.
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