Raising Seed Stage Funding

Extracted 05MAR2012 from http://www.forbes.com/sites/alextaub/2012/03/01/what-it-takes-to-raise-seed-s...

From the beginning of 2011 to the present, I’ve noticed a pronounced difference between companies that have been able to raise funds and those that have not. In order to raise seed-stage funding you need all or most of the following:

1) A great team – usually a combination of people in product, business, tech or design.

2) A big market.

3) The first version of your product. In tech vernacular, this is known as a minimum viable product, alpha, or version 1.

4) The ability to demonstrate that your product is gaining traction. The only metrics that matter: revenue and active user base.

...Before 2012, a general product idea, some wireframes, and a soft business plan might suffice. You generally did not need a live product deployed to raise seed capital. Now, you need to have a product in the hands of users or partners. It must be live and working (reasonably) well.

While these requirements may seem like a lot to ask from a new company, you need to consider the low cost of building and hosting your product in the present climate. If you have a developer and a designer on the founding team, the first version of your product should cost less than $5,000...

If you can show that your startup makes money and there is a clear business model, it will be much easier for investors to evaluate. If your approach is more about usage or user acquisition, you need to have clear paths to monetization. Investors are looking for real businesses to put money into, not “things.”

Quite frankly, if you don’t hit a majority of these criteria, you shouldn’t try to seek outside investment in the first place; you’ll only get undesirable terms.