This fund finances the business’s first steps. Seed funding helps grow the business when combined with enough revenue, a successful business strategy, and the perseverance and dedication of investors. It is the first money that a business raises. Seed funding is the first official equity funding stage. For instance, Kenya’s e-health startup Zuri recently raised a $1.3 million pre-seed round of funding to grow its product offerings and launch operations in new markets. Typically, pre-seed funding is bootstrapping as investors at this stage are very unlikely to invest in exchange for equity. The nature of the company and the initial cost of setting it up influence how soon this stage of funding materializes. Conventionally, the pre-seed funders are the founders themselves, their close friends, or relatives. It is the stage where the company is just kicking off operations. This stage of funding comes very early in the life of the startup. Because of this, nearly all investments are structured to allow the investor to retain partial ownership of the company. The funding participants are mainly the individuals who hope to gain funding for their companies and the potential investors/investors who invest in the business because they trust the business to succeed and hope to gain something in return for their investments. As a business grows and becomes more mature, it advances towards funding rounds, typically beginning with a seed round and continuing with A, B, and C funding rounds. In raising funds, startup founders need to be familiar with the various stages of raising capital, as startups require capital through their life cycle. Also, it reflects why the company is seeking new capital. More importantly, valuation is vital in any funding stage as it influences the type of investors likely to get involved. The valuation reflects vital factors, including management, proven track record, market size, maturity level, growth prospects, and company risk. Lately, there has been a big boom in African e-commerce, fintech startups, and related venture capital investment, with Kenya, South Africa, and Nigeria already being considered hubs conducive for startups in Africa and attracting more funding.īefore any round of funding begins, analysts conduct a valuation of the company. New businesses need money either as “startup funding” or “startup capital” because having access to capital is crucial for several reasons, including launching and growing the business from the idea stage to optimal capability.Īccording to statistics, at least 83% of entrepreneurs do not have access to capital. Sadly, African startups are not exempted from this difficulty, as they face this obstacle even more intensely. Historically, most startups lack seamless access to early-stage financing from investors.
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