Book Now Book Now

Is Seed Funding Right for Your Startup?


At Allied Legal, a mistake we encounter with startups is when they rush to meet with investors without considering their options. There are multiple investment pathways founders can take when raising capital to accelerate growth. Seed financing, for example, can be useful for early-stage startups, particularly those in the research or product development stages of their venture. 

Seed funding or ‘seed capital’ requires an investor to provide capital in exchange for equity interest in a startup. Initially, these investors are typically family members, friends or angel investors. Angel investors are crucial players in seed financing, as they have the capacity to provide substantial capital and are more likely to take a chance on new ventures.

From an investment standpoint, seed financing is one of the riskiest forms of investing as investors are valuing a startup based on projections rather than profit. Due to this, venture capitalists (VC’s) often avoid seed financing in the initial rounds.  

In seed financing there are a few key stages or ‘rounds’ in which founders generate capital. Depending on the scale of the venture, founders may feel that only one ‘seed round’ is necessary, where others may require multiple. 

Here are the rounds usually involved in seed financing:

  • Seed Round: this stage relates to ground floor operations such as determining market fit or researching and developing your startup’s offering. Funding can be raised by approaching your immediate circle before moving to angel investors.
  • Series A: relates to the first round of shares proposed to angel investors or early-stage venture capitalists. During this stage you will need to prove to financiers why your startup is worth the investment by optimising your offering and business model. 
  • Series B: founders use financial backing to scale their startup and build traction. Success during this stage is reliant on your ability to prove that your startup is making a profit. Increased funding is usually used for business development, marketing and startup sales. 
  • Series C & Onwards: all subsequent funding rounds are used to scale your startup. Commonly, startups will stop at Series C of funding.

Overall, the process can be demanding as you will be required to prove your startup’s growth at every new stage or series. Additionally, you may be required to vary your agreement or equity stake depending on the investor and stage of seed funding. However, seed funding can also be a great way for startups to develop their offering and accelerate their growth. 

Need Help?  Contact Us 

At Allied Legal we deal with startups and investors on a daily basis. If you need assistance preparing your relevant agreements, we are the ones to contact. If you would like to learn more about how we can help, give us a call on 03 8638 0888 or send us an email at hello@alliedlegal.com.au.

You might also like our article What Investors Focus on When Funding Early-Stage Ventures

Related Articles

VIEW ALL VIEW ALL

Free Mental Health Resources Founders Should Know About

As a founder, launching or scaling your startup can be both gratifying and tremendously stressful as you are responsible for your startups success or failure. Founding a startup is a unique experience which involves significant financial, social and emotional stress. According to Monash University, 72% of entrepreneurs report mental health concerns. Unfortunately, founders who are actively working with therapists or physiatrists are low, with female founders more likely to enlist support.  


Interview: Jamid Dewani from ConsultXperts

ConsultXperts is an online platform connecting companies with highly skilled business, digital and technology professionals. The experts – inclusive of freelancers, independent contractors and interim executives – are subject to a rigorous vetting process, with only 30% of applicants approved to work. According to CEO and co-founder Jamid Dewani, this ensures that ConsultXperts’ talent base is comprised only of top talent. The Melbourne startup also maintains a close relationship with their experts, providing them with flexibility and support. 


Leveraging Startup Culture for Success

Over the last few years, we have seen major changes to workplace culture, from remote working to more agile and adaptable workspaces. ‘Startup culture’ has moved past the startup garage to the mainstream and has brought with it distinctive notions of what being a startup means for founders and their employees. A startup’s ‘culture’ is embedded in the internal and external philosophies that guides innovation. But, as startups growand adapt to change, the definition of ‘culture’ is extended beyond a profit-centric model to one that encompasses important elements such as shared goals and acceptable behaviours. 

Subscribe

Subscribe to our newsletter to receive exclusive offers and the latest news on our products and services.

First Name
Last Name
Email Address

Need some help?

If you need assistance, why not book a call with us today? Or fill out
the form below to book in for a free confidential consultation.