How to raise pre-seed and seed money: 5 alternative strategies
By William Stringer.
Want to know how to raise seed money for your startup? You are in the right place. For growth-driven startups, accessing capital early means you can scale faster.
The round table is the first official step in equity financing. This means that you can expect to sell some of the property, usually in shares or convertible notes, in exchange for principal. (Prior pre-pull rounds are sometimes referred to as ‘pre-seed’ funding and may consist of a ‘friends and family’ round or an acorn round.)
But how can you raise seed money, or even pre-seed money?
Venture capital is an option, even if it takes a long time. Research shows that less than one percent of startups get venture capital funding. Of this fraction, just 2.2% of funding went to black founders, and only 2.7% went to founders. In addition, this process of presenting to VCs often takes months or even years. For many founders, venture capital funding is not really a viable option.
At this early stage, your startup is unlikely to qualify for a bank loan. Banks usually look for more than 3 years of business history before they even consider granting credit. So if you are an ambitious founder who does not fit the mold, how can you raise pre-seed or start-up funds?
Fortunately, a new wave of early stage funding sources are emerging, designed to be more accessible and founders friendly. Here are 5 alternative ways to get seed funding for your startup.
Republic is the leader in the crowdfunding space. It is a platform application that allows startups to raise capital through crowdfunding from individual and institutional investors. Put more simply, it’s Kickstarter for startups.
This crowdfunding approach allows startups to raise pre-seed and seed money from a healthy network of enthusiastic investors, without having to spend hours at pitch meetings.
Republic requires that startups go through a rigorous selection process; only around 5% of startups will be accepted. That said, they provide a unique opportunity to quickly introduce yourself to many different investors, without needing to introduce each one individually. It’s a difficult but simplified way to get seed funding for your startup. Learn more about how they rate startups here.. If you decide to apply, you can do so here.
At Chiso, we’re offering a whole new way to invest in early stage startups and ideas through a two-part approach we call a CISA. The CISA is a unique combination of actions and a revenue sharing agreement. Unlike other investment options, you can qualify for pre-seed and seed funding from Chiso even before you have any proceeds or income.
We designed the CISA to be fair to the founders. Here’s how:
- Repay the CISA with a percentage of your income, but only when that income is greater than $ 40,000.
- When you repay the CISA, you also buy back part of the capital initially granted to Chiso.
- You are free to use the capital as you see fit.
- You will never pay more than twice the amount of the initial investment, adjusted for inflation.
We’re built on the idea that funding shouldn’t be limited to a tiny handful of founders. Instead, our mission is to democratize entrepreneurship.
If you are considering using seed funding to hire a team, why not skip a step and trade equity for expertise? This is the idea behind KnowCap. KnowCap connects businesses with a team of start-up experts who cover key functions including marketing, sales, engineering, and strategy.
These experts work directly with the founders to provide coaching, strategic advice, and in many cases, create value by creating a product MVP, creating a new brand identity, and arranging calls with potential customers. In exchange for access to this “knowledge capital”, the founders provide equity capital to KnowCap.
While not pre-seed or seed funding in the traditional sense, it is a great alternative to help founders build a solid foundation from which the business can grow. . Learn more about KnowCap here.
Zebras Unite is a startup co-op designed explicitly to serve founders that mainstream VC overlooks and underestimates; namely, women and people of color. What started as a community has become a source of capital.
You’ve probably heard of startups described as “unicorns”; Zebras Unite is an intentional rejection of the unicorn success model. (You can read more about this concept here.)
Zebras Unite is the place to be for founders who believe the business should support the company rather than define it. If you’re building a community-driven, mission-driven organization, you’ll likely feel right at home in the Zebras Unite ecosystem. To be considered for funding, join the Zebras Unite online community.
State and federal seed grants
There are a plethora of grants for start-ups and small businesses. Unlike most other sources of start-up funding, grants do not require you to give up your capital or repay the money.
Seed grant programs typically focus on serving otherwise underserved groups, such as minorities, veterans, people from rural communities, and nonprofits. They also typically focus on advancing specific sectors, such as education, technology, and healthcare.
Unfortunately, there is no central database that covers all the grant opportunities available, so you will have to spend time researching if you go this route. here is a list of some good places to start, comprising:
So that’s it! Now you know 5 new ways to raise seed money for your startup.
William Stringer is the co-founder and CEO of Chisos capital, a company that invests in ideas, and the founders with the potential to bring them to life. Through our proprietary investment approach, CISA, we write checks to early stage entrepreneurs and ideas. Inspired by the desert oasis of the Chiso Mountains, Chiso Capital seeks to democratize opportunities.