What is seed money?
Seed money is important in the first steps of building a business up to the point of launching your product. Seed money comes from investors who will exchange money in return for a share in the company. The aim of seed money is to support small businesses until they begin to create a small profit and gain the attention of high end investors willing to put more money into your company. Businesses will commonly use seed money for product development, buying equipment and hiring team members. The amounts invested from seed money are usually lower than that of venture capitalists.
How important is seed money?
Seed money is crucial in launching a business when you are unable to do so on your own. This is good for when you don’t have enough personal savings to fund your business or may think this is too much of a risk to take. Whilst you still have to give up some of your shares to investors it is better to have a successful business than a hundred percent ownership. Professional angel investors help greatly in making sure your business is successful. They will provide a larger sum of money through a loan or in return for a share in the company. Not only are these investments beneficial for entrepreneurs but also benefit investors as the company grows.
Should you use seed money?
If you are struggling with finances to get your business started, seed money is the perfect alternative for you and provides you with sufficient assets to get your business set up. If you feel like your business is not going anywhere, seed money may be a good way to accelerate your company’s growth and make it more successful. If you feel a personal risk by investing your own money into the business seed money can reduce this stress and provide you with funds to start your company. If you’re looking for a partner to help run your business seed money is perfect for you as investors will take some ownership of the comps and help with funding. If you’re considering using seed money to kick start your business visit https://seedcash.co.nz/ to read more about this.
Why you shouldn’t use seed money
If you want full ownership over your company, seed money is not the strategy for you. Also issues of debt can be quite off putting as this is a burden you have to deal with your whole life. As well as this, asking family and friends for money can negatively affect your relationships and so you should avoid seed money to reduce these potential disputes.
What mistakes do people make?
Some common mistakes entrepreneurs make when seeking seed money is that they tend to give up too much of their company too quickly and therefore not having equity remaining for later. Also some tend to forget about the importance of debt and make agreements that their current funds cannot afford.