I remember when we started Kalys Solutions. My goodness, it was a mess! No idea what we were doing, how we would do it nor why we were doing it, we were pretty much lost! Back then, neither of us was aware of the startup scene, which, fun fact, was already blooming in Cyprus. We were just two girls, tired of working for other people, who were presented with an opportunity and just said yes (just as Snow Patrol’s song “Just say yes” suggests. For those of you who haven’t heard it… Well, in my book, it’s a must!). So, once the final decision was taken, we both quit our jobs and embarked on the entrepreneurial journey, we were faced with many critical decisions, which we had never anticipated. I’ll be perfectly honest; I was waiting for the boogie man to come out from under my bed. Thankfully, he never did, but still, the fear was very real.
Now, why am I going down memory lane you ask. I’m getting to that in a moment really, because, the biggest “amount”, pun intended, of decisions we had to take was relating to money. Money, money, money and money! It is a horrible concept really, but a necessary “evilish” (I know, it’s not a word, but it’s my word) one. It would be very nice, if one could start a business without having to put down or look for any money, but that is impossible unfortunately. However, fear not! There is always an answer for these things, just as long as you are willing to try and figure it out!
When starting a business, one of the most important funding you will ever need is seed funding. This term was very new, almost unknown, to me when we first started. However, having set up our own and quite a few other startups I can honestly say that, simply put, it’s simply operations funds! It is only rational that a company will not generate income from the very beginning of functioning (when developing an idea and/or product) to sustain itself and therefore will need some funds to get it by until it can. This is precisely what seed funding is.
It is mostly referred to as an investment, and this is how you should look at it, as it is funds put in it to make it feasible, until it can generate, optimally, significant amounts. This is the type of very early stage investment which can come from the company founders, friends and family as well as private investments (angel funding, venture capitalists, crowdfunding, incubators etc) or just a combination of two or more sources. There is also, one more category, from which you can gain seed funding and that is government funding. This is what we did when we started. We partially put our own investment and used government funds (given especially to startups at early stage) to start our business, which ultimately covered our set up and running costs for about 7 months overall.
So, all in all, there are simple steps you need to follow to decide on and acquire seed funding:
Have a careful look at how much you will need for the development of the idea and/or product in conjunction to how much time you will need to have a working service and/or product, ready to be put in the market. Once you’ve done that, you will then need to calculate the running expenses (set up, rent, electricity, stationery, salaries etc) for that specific time through which income will not be generated.
Tip: Always, calculate three months over the period you think you will need, just to be on the safe side
Have a look at your own funds. Did you save up money while you were working as an employee? Did your parents set up a savings account for you when you were younger, which you can now access? If you have a partner, how much can they offer?
And more importantly, should you have such funds, are they enough to cover your calculated costs?
Most of the time, newly incorporated businesses, will need further funding. So then you need to decide what type you will need to pursue.
Does your family have some funds to provide? Do you want to get involved with friends on this? Are you willing to give equity to private investors? Is there any finding opportunity provided by your country’s government for this?
It really all depends on how much you will need to start and how much you are willing to give.
Once you have a clear image of what you need and a set of milestones to show you your targets, go for the funding!
There’s a saying reading “Never do tomorrow what you can do today” and it is to the point. Acquiring the funding can be time consuming in itself, so, imagine delaying the beginning of the journey. If you have the opportunity and possibility to start today, then just do so, no matter how unsafe you feel.
Overall, my personal advice is to always have a good plan set out, in order to know your goals and needs. Also, you must always set down specific terms with your investors, should you choose the private investing path. This will allow for everyone to be clear on their roles, responsibilities and deliverables, until you are ready to generate income or go to the next round of investment!
Photo credit: notcot.com