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When you want to start a new business, you need capital. The capital you get to start a business is seed funding.
Seed funding is the capital that helps you start a new business. You can use it, to make your new product or services market ready. You get seed funding either from the government or a private investor.
Nowadays, the valuation of the company is quite popular among the startup founders, so they try to raise funds even when there is no need and they join the rat race of a startup. Remember that when an investor invests in your company, he also takes some shares of the company in return. Many times, the founders of the company lose a lot of their shares in raising funds and later regret it.
So, first of all you should understand your market and customer, understand its potential, how big is this market is and how big can be in the future. And if you feel that you will need more capital to move ahead in the market, then only you should go to the investor. The investor will also invest only when he sees potential in you and your business idea.
Angel Investor: It is a private investor, who invest his personal money in any business, and his main motive is to make profit by taking exit, when the valuation of company increased.
Venture Capitalists (VCs): These are professional investors who invest when the company starts growing and they manage large funds. They avoid doing seed funding.
Crowd funding: Through this medium, startups take small amounts from many people through online. And in return they are given shares of the company according to their investment in that company. This is a completely new concept right now and is very less in practice.
Indian Government Initiatives on Seed Funding
Today the Indian government is doing a lot to promote startups. The government has made many financial schemes which have given a big boost to the startup eco system in the country.
Some Initiatives are:
Startup India Initiative: To promote startups in India, the Government of India started this scheme in January 2016. In this, some main schemes and benefits are given for seed funding.
Seed funding: In this, the startup is funded by the government through seed funding.
Tax benefits: The government gives benefits to registered startups through tax holidays for a few days to help them grow.
Mentorship program: From time to time, the government provides proper guidance and mentorship to startups so that the problems faced by the business can be resolved.
Impact of seed funding
Seed funding plays an important role in the growth of any startup. It provides a base to the startup which makes it easier for the startup to make its product and do market research. There are some important aspects of this.
Product Development: With the help of seed funding, a startup improves its product or service as per the market.
Market Research: With the help of seed funding, the startup understands the market and analyses the customer’s needs. This makes it easier for it to grow its business.
Team Building: The team plays an important role in growing any startup. Only if the team is skilled can the business grow. Startups also use seed funding to build a team.
Conclusion
Seed funding is a boon for any startup as it makes business growth easier. It depends on the founder and business nature of the startup whether it takes funding from the government or an angel investor.
If you also want to start a startup, then find a good idea and start your business through seed funding.