A quick guide to seed funding for startups

Last updated: 13 August 2024. 

As a startup founder, you may wonder what seed funding is and how it can benefit your business. This quick read will get you up to speed.

What is seed funding?

Seed funding is typically money invested in a company at its early stages when it is still developing its product or service.

This type of funding can come from many different sources, such as angel investors, venture capitalists or even the government.

Like the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) for example, (we'll explain more later).

Before you do anything

However, if you are thinking about applying for seed funding, there are a few things you should keep in mind. You will need:

• To have a clear idea of what you need the money for.
• To know how you will use the investment.
• And have a well-developed business plan that outlines your company's goals - and how you intend to achieve them.

It’s important to appreciate that the benefits of securing seed funding can help get your business off the ground, provide working capital to hire staff or develop your product - and give you a boost when it comes to marketing and publicity.

However, it’s important to remember that there is no guarantee of success when it comes to securing seed funding.

Always do your research and listen to the experts before making any decisions about how to finance your startup. There are countless books, videos, and even Twitter threads, written by successful entrepreneurs who've been there, done that.

Nevertheless, here’s a quick introduction to the types of seed funding up for grabs.

How can I get seed funding for my startup?

There are a few ways to go about getting seed funding for your startup, aside from asking your family and friends to invest.

The most common is to pitch to angel investors (with a killer presentation, of course).

You could also approach a venture capital firm but generally speaking, founders pitch to VCs much later in their journey, when the business is primed to attract the big bucks.

There are other options too, such as accelerators, crowdfunding platforms, government grants and business loans.

We mentioned EIS and SEIS earlier, two great ways for young companies to get the capital they need. But what's so great about SEIS and EIS? Well:

• EIS offers tax relief to investors and is a long-running scheme from the government to help small and high-risk firms access finance.
• SEIS is very similar to EIS but designed for very early-stage companies.

To apply for EIS or SEIS, you should first look at getting advance assurance (something we can help with). Download our FREE guide to learn more about these schemes.

What are the benefits of seed funding?

The main benefit of getting seed funding for your startup is to help get your business up and running by providing the initial capital you need.

The next best reason is that this funding can give you a boost in terms of credibility and exposure, as well as help you to build valuable relationships with investors.

What are the risks of seed funding?

There are a few risks associated with seed funding - the most obvious being that you’ll have to give up equity (a share in your company) in exchange for the investment. You may also be required to give up some control over the direction of your business.

But that’s not necessarily a bad thing; that investment could help you achieve things that wouldn't have been possible otherwise.

It's also worth bearing in mind that the funding may not be enough to get your business off the ground, in which case you’ll have to go back to the drawing board.

There’s no doubt that seed funding is an important step for many startups, but it's only one part of the journey. With hard work and dedication, your startup can succeed regardless of whether you receive seed funding.

So, don't be discouraged if you don't receive funding immediately - keep working on your business and you'll eventually get there.

Quick recap

So to sum up, there are many ways to secure seed funding, including but not limited to:

• Friends and family
• Crowdfunding
• Incubators
• Accelerators
• Grants
• Business loans
• SEIS
• EIS
• Angel investors
• VCs

We have a range of resources and tools to help you prepare for this next step in your journey. And when you're ready to launch your funding round, streamline the whole process with Vestd. 

Learn more