Namaste, young entrepreneurs of India! Do revolutionary ideas exist that would bring in this kind of a revolution? Maybe on bringing in one or any kind. This is just right, folks. We get truly excited and invigorated seeing new, fresh startups across the geography here at Indian. And do call out for just the one wonderful initiative in seed funding towards this purpose. This leaves us with one pretty important question that pops up into almost everybody’s minds, “How much seed funding do I really need?” Which actually is one question that truly does have the capacity to result in a vastly different path your startup might eventually take. Now let’s just take a close look at one really important facet of how startups grow together.
What is Seed Funding?
It is the very first money and gives life to your idea of a start-up. Seed money represents a simple financial base for your early operations. It can be treated as ‘fertilizer’ for your developing start-up. Not scaling up to an expansion in the big league; nor any marketing push at this juncture, but there does exist a validation of a core concept; development of a prototype; proper earnest market research, and good grounding ahead.
The Need for Proper Amount of Funding
Obtain enough seed capital. It gets stuck in a holding pattern if it doesn’t have sufficient seed capital. Its inability to move and make some pivotal milestones is restricted by its very resource limitations as well. Going in too capital-intensive too soon dilutes the equity too early, which will most often challenge control and equity retained over that period. It is a balance to be achieved in such a manner that there is enough capital at hand to support growth without relinquishing the ownership front too soon.
Amount of Seed Funding Needed?
How much seed funding is required, after all, is somewhat of a question not easily answered. Proper, however, can make it more manageable too. Here’s a stepwise approach from StartupFlora:
- Quote each and every Expenditure Religiously: Prepare a list of all the unavoidable expenditures. Be precise in all your estimates. Here are some key areas that require tracking
- Product Development Costs: This will also include the cost of creating your core product or service. This can be the mobile app, website design, or even the manufacture of a physical product. Proper quotes must be obtained from the developers, designers, or manufacturers in charge.
- You have to reach your target market: All these include running a digital marketing campaign, creating content, advertising on social media, public relations, and generating sales leads.
- Know your legal status. That would include registration fees of Legal and regulatory costs:usiness, compliance charges that could have a bearing on your business, licenses to conduct your business, permits to operate your business, and defensive measures to protect your intellectual properties.
- Operational Costs: This involves overhead costs that support a start-up in operating its daily activities: these involve office rents, purchase or hiring of equipment, leasing, employee salaries, utilities, among other overhead costs although typically very miniscule.
- Estimate your runway: Decide how long your seed capital should last in an ideal world. For most startups, a runway of 12 to 18 months is recommended. That allows sufficient time to make all major milestones, see some traction, and attract subsequent funding rounds.
- Definition of Measurable Milestones: Those hard things that you can point to investors in the event you need to go raise money someday? Precisely observable yet quantifiable is your definition of a measurable milestone. For instance,
- -demo and showing first functionalities of either a prototype, or working MVP
- -almost users via early adopter, or even pilot engagement
- -revenue at launch or sooner.
- Part of key industrial partnerships, and so on and so forth.
- Add a Contingency Buffer: For every industry, too many unknowns have to come up by a startup. Then add a contingency buffer of roughly about 20% to take all the unknown things, the time and cost overruns or any kind of costs that would not be there initially.
Real Example of a Startup in India
Example of an assumed Indian start-up developing an agritech product:
- Technology Development: ₹7,00,000
- Market Research & Pilot Program: ₹3,00,000
- Legal & Compliance: ₹1,00,000
- Operating Cost for 12 months: ₹4,00,000
- Total Cost Estimate: ₹15,00,000
- Contingency (20%): ₹3,00,000
- Total Seed Funding Required: ₹18,00,000
Related Article: Seed Funding vs. Angel Investment: Which is Better?
Ask the Experts from StartupFlora about Indian Start-ups
- Grounded: Do not overestimate the cost. They are professional investors and will catch the overblown or padded numbers.
- Lean: Indian start-ups work like magic if they can showcase creativity and value. Don’t waste even a single penny; do make every praise count.
- Look for mentors and counsels: There some veterans of the Indian Startup Ecosystem, industry experts, and mentors, who will present priceless advice and guidance.
- Develop a Pitch: The right words to communicate your needs clearly, concisely and persuasively to investors will help. Highlight your unique value proposition, familiarity with the Indian market, and expansion plans.
- Understand the Indian Investor Landscape: Knowledge of specific preferences, investment criteria, and funding trends prevalent in the Indian Startup Ecosystem.
Key Takeaways for Indian Entrepreneurs
Seed funding is one of the most important first steps any entrepreneur makes along their entrepreneurship journey, mainly because you can be given the right resources to push the vision at hand. You’re going to really position your start-up for success in the vibrant and quite competitive Indian markets by embracing lean operations in very minute details of how much funding is to be needed for the venture.
StartupFlora is here to assist you right from the victory journey. Feel free to reach out to us today so that we can assist you in meeting your requirements. We’d be able to lead you through all the seed funding details of India and step-by-step move you towards opening up gates of sustainable growth and prosperity for your startup.