Seed Funding

Many of the people that I meet, who have an idea that they wish to work on seem to face a huge problem. Their biggest complaint seems to be that they find it hard to generate seed funding for their projects/startups. The key issue is that most people do not understand what seed funding is.

So the entry in Wikipedia suggest – The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own, or until it is ready for further investments.

Normally, Seed Money is a very small quantum of finance needed to get the ball rolling in terms of a venture. This may include getting the incorporation done, getting the basic banking setup in place and also some of the basic requisites for starting off with the venture. In some cases, this may include travel, computers, space and the sort depending on the business that one is embarking on.

Normally, the best means of raising this funding is through accumulated savings, friends and family. Now taking money from friends or family is stigmatised in India, I don’t seem to understand why? Even Mark Zuckerberg took seed capital from his friend Eduardo Saverin to start Facebook. I do not see what harm exists in taking money from people who know you best. 

An investor invests in a business based on his judgement of the promoters and their ability to execute. If as an entrepreneur, one cannot convince family and friends about ones execution capabilities, is there any reason to pursue entrepreneurship?

It is important to look at the people that you know, are comfortable with and who have a good capability of making a judgement on you. If these people believe that you have the capability to execute and put money on you, not only their money but also their goodwill will carry you forward.

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