Consumption & Production
Funding Startups from the Seed
You have a great business idea! Developing it could change your future. But you can’t start without a sufficient source of revenue. How do you begin financing it?
Assuming you have a developed concept, most business plans begin with seed funding, and if they advance, move to outside sources of investment from so-called “angel investors” and venture capitalists. If the business generates consistent revenue or passes other key performance indicators, it may undergo a series of funding rounds to scale the business across different markets and have a solid plan for long-term profits.
However, the beginning steps of the journey can be the most important and daunting. So, let’s focus on the first stage of funding, known as “seeding.”
The most common way to start a business begins with borrowing money from family and friends. It may be easier to persuade them to fund your dream than it would a bank. People with similar passions in your community may also be willing to step up.
Prominent children’s media organization, The Mother Company, started on a playground with two women asking other parents for feedback on their business concept while their children played. What they said resonated with the other parents, some of whom decided to invest in the idea. The company ultimately raised about $500,000 stemming from playground playdates.
Aside from generating funds from social connections, taking out loans, using credit cards and personal savings are other common options. Many entrepreneurs continue to work and fund their activities through their day jobs. Sometimes, individuals even augment their income with side work that eventually becomes their business model.
Take for instance rock-climbing enthusiast Yvon Chouinard who started making his own climbing equipment. Later, he began selling it out of his van. He also sold some rugby jerseys he got from Scotland during his travels and eventually opened a store. The business ultimately became Patagonia, one the largest retailers of outdoor gear in the world.
Another source of revenue that has grown in popularity is crowdfunding, the practice of raising capital with appealing ideas from a large number of people on forums like Kickstarter, Indiegogo, or Patreon.
Priska Diaz founded Bittylab, a company that designs products for infants, through crowdfunding. She initially pitched her concept, a bottle that provides air-free milk to help babies avoid spitting up, on Kickstarter. However, the effort fell flat.
So she upped her game and tried again several years later, this time creating a website detailing the prototype. The concept generated a swell of interest on social media, and she began preselling and eventually raised enough revenue to launch her product.
More recent business development trends include startup incubators and accelerators. They provide entrepreneurs with a variety of support, including mentoring, training, works space, and sometimes seed funding. Major industry players are even in on the game.
FUSO GreenLab, for one, actively encourages outside individuals and startups to pitch ideas that apply to the mobility industry. We aim to become a client and development partner, by offering market access, mentorship from experts, and access to testing facilities such as our world-class proving grounds in Kitsuregawa.
Starting a new business is daunting and requires passion, establishing a viable plan, and weathering initial failures. Finding a way to support your business is one of the first and most important steps.