What Should You Consider if You Want to Fund a Business with the Seed Funding Option?

As I discussed in my last blog post outlining the Three Key Types of Funding, funding a business on your own is very often the choice made by entrepreneurs, especially in the early, start-up phase of the business.  The option to self-finance in order to get things off the ground, as with other funding methods, has its upside and its downside.

The obvious first consideration is the significant amount of money that may be required to get things underway when pulling together inventory, employees, property leases, etc.  This can easily move into the range of $100-200K before your business starts to turn a profit.  The time frame that this might require can easily run into three years or more.

 

Seed Funding Key Consideration – 

If you have access to funds of this kind, it can be a great way to go.  One of the things that makes this such an attractive option is the pot at the end of the rainbow (also called “profit”). With seed funding, when your company becomes profitable, the profits come back to you.  However, what this also means is that if your business flounders, if it’s a failure…if the pot at the end of that rainbow is empty…you have a lot to lose.

 

Seed Funding Key Advantage – 

Another very attractive part of the seed funding piece for many is the fact that YOU are in control of your business and how it is run.  You and those you choose to help manage your business venture can run things as you see fit, whether it is day-to-day decisions or future deals, such as private equity sales.  There’s no waiting for anyone else’s stamp of approval!

 

The promise of profits and control are a huge motivation for choosing to seed fund a business for an enormous number of start-ups.  If you’ve had your own experience (whether good or bad) with seed funding your business, maybe you can share a little insight.  In my next blog post, I will talk about another type of funding for your business…Angel Funding.