Seed Capital UK

Most startups are based around an innovative idea or product, but the vast majority still fail to get off the ground. What’s the difference between achieving scalable growth and failure? For many startups, it’s finding adequate funding, a journey that often begins with seed funding.  

In this blog we’ll explore:

  • What is Seed Capital
  • Types of seed funding
  • How to create a pitch deck to raise seed capital in the UK
  • How to choose the right investor

What is Seed Capital

Seed capital is the money raised to begin developing an idea for your business or product. This funding generally covers only the costs of creating a proposal. After securing seed capital in the UK, startups may approach venture capitalists to obtain additional financing.

The earliest stage of funding a startup or a new company is known as “pre-seed” funding. This stage typically refers to the period in which you as the founders are getting your operations off the ground. The most common pre-seed funders are obviously the founders themselves, as well as close friends, supporters and family.

Seed funding is the first official equity funding stage. It typically represents the first official money that your business manages to raise. Some companies never extend beyond seed funding into Series A rounds or beyond.

Types of seed funding

Many startups have turned to crowdfunding platforms. Despite your industry, there’s a platform that can help you raise the funds you need to get to the next level. But as with any business venture, it’s essential to pay attention to the details. Some platforms have specific timeframes for raising funds.

Often aimed at early-stage startups, incubators focus on nurturing innovation and idea generation. They typically offer smaller investments as well as workspace support, networking and mentorship opportunities, and demo days or pitch events. 

Accelerators focus on helping you grow. They offer selected companies a set funding amount in exchange for a set percentage of equity. Many also deliver indirect access to funding through mentorship opportunities or by hosting networking events. Some accelerators also offer workspace support, including access to technology and services that can drive growth.  

Angel investors are high net worth individuals who invest seed capital for startups in exchange for equity in a company. Many angel investors use convertible debt, which allows the funds loaned to be converted into equity. Angel investors may also join together in angel groups. This lets them invest more significant sums, benefit from larger ownership shares, and receive larger potential returns. Angel groups often include investors from a range of industries and markets and will often decide as a group whether to invest, how much they should invest, and under what terms.

How to create a pitch deck to raise seed capital in the UK

A pitch deck is a visual document that provides investors with essential information about your business plan, product or services, fundraising needs, and key metrics like valuation, target market, and financial goals. One of the single most important aspects of an effective pitch deck is to organize it based on the audience and forum to which it is being presented.

Create a compelling story about your business. Why did you start this business? Why now? What do you bring to the table that sets your business apart? What is your goal? Your passion? This is your opportunity to show investors that you’re passionate about your business and driven to see it succeed. 

Your pitch deck should resonate with potential investors. To do this, you need to know what they’re looking for. Above all, keep investors interested and engaged. Include your insights about the market you’ll be entering and demonstrate that you have a deep understanding of the steps your business will take as it grows. 

How to choose the right investor

When choosing an investor, don’t just choose anyone or the first one that shows an interest in your business.

Decide what type of investor you want. Do you want an investor who plays an active role, or would you like them to stay in the background? Most likely the latter, yes? Do your research. Look at their net worth and past investments. Have the businesses they’ve invested in been successful? 

Set a funding goal and incorporate that funding into your business plan. Look beyond funding and think about what expertise or advice would be most helpful for your business. At the end of the day you need more than just money. Think carefully about each potential investor. Are they a good fit for your business? 

It’s no secret that acquiring seed capital in the UK or anywhere else isn’t easy. Want to give your startup the best chance to grow? Ultimately, it comes down to understanding and partnering with Drop Studio.

Our passion is supporting entrepreneurs and leaders grow their businesses. Let us help you!