How to Scale your Start-up Business using Seed Funding

Seed funding is a formal round of financing that typically involves angel investors, crowdfunding platforms

James Robson
May 1, 2024
Business

Seed funding is a formal round of financing that typically involves angel investors, crowdfunding platforms, and venture capitalists. It’s an important stage for a start-up business as it provides the finance to scale up and grow with confidence.

This type of funding is commonly used to progress from the minimum viable product (MVP)stage to a position where the business has a solid offering with demonstrable market support and an engaged team.

Seed investors want to see a product or service that’s attracting attention in the market and that customers find useful, but also a young business that’s ripe for development under strong management.

What to consider when attracting seed funding as a start-up business

Here are just a few questions to ask yourself if you’re about to seek seed funding:

Do I have a clear business plan?

Your business plan should identify your operational targets and the strategy for reaching them. A clear explanation of your product or service and how it fits into the market – whether it’s disruptive, for example, and how it differs fromthe competition – provides the context investors need to make their funding decisions.

Do I fully understand mymarket?

Investors also need to know that you understand your target market and where your competition lies – for example, why your customers will choose your products or services over those of your rivals and the trends that might impact your position in the future.

Can I show I’ve gained tractionin my market?

Increasing revenues demonstrate that your business idea is viable, but social proof and user engagement show that people like what you’re offering and can also indicate that you’re gaining market traction.

So, if you’re about to seek seed funding for your start-up, or you’ve already secured it, how can you use it to scale up?

How to use seed funding to scale your start-up business

Build and develop your team

You may already have a small team in place but will need to expand and develop a strong management and operational team as the business grows. Key personnel with specific expertise or previous experience can guide your business forward and ensure that you meet the strategic targets laid out in your business plan.

 

Carry out market research to build a solid offering

Improving the value provided by your product or service, as perceived by your target market, helps you stand out as a business. Market research will guide you on whereyou need to spend your seed funding – perhaps on technology, or on improving your sales and marketing strategies.

Develop your product ready for future funding rounds

Sustainably developing your product based on customer feedback can help you gain a greater share of the market and position you as a solid proposition for investors atthe next stage of funding.

Adjust or expand your marketing to grow your customer base

Seed funding allows you to expand or adjust your marketing strategy as necessary. As your start-up grows, you might find that you can reach your target audience indifferent ways – for example, in person at trade shows or conferences.

Using seed funding to develop long-term profitability

Seed funding allows you to refine your product or service and ensure that you meet changing market demands. Importantly, it offers you flexibility and agility to pivotshould unforeseen issues arise.

In a saturated market, particularly, securing funding at this early stage provides a solid base from which to grow and can help you build the unique selling proposition and competitive advantage that you need.

Chris Bristow is a business debt expert at Real Business Rescue, company rescue, restructuring and liquidation specialists with a wealth of experience insupporting company directors in financial difficulty.

Former lawyer, now building the future of SME finance.