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How to Raise Pre-Seed & Seed Funding: 5 Alternative Strategies

seed funding

How to Raise Pre-Seed & Seed Funding: 5 Alternative Strategies

Want to learn how to raise seed funding for your startup? You’re in the right place.

For growth-focused startups, getting access to capital early means that you can scale faster.

The seed round is the first official stage of equity funding. That means that you can expect to give up some ownership, typically in equity or a convertible note, in exchange for capital. (Earlier pre-traction rounds are sometimes called “pre-seed” funding, and may consist of a “friends and family” round, or acorn round.)

But how can you raise seed funding, or even pre-seed funding?

Venture capital is an option, albeit a longshot. Research shows that less than one percent of startups get VC funding. Of that fraction, just 2.2% of funding went to Black founders, and only 2.7% went to female founders. Plus, this process of pitching to VCs often takes months or even years. For many founders, VC funding isn’t really a viable option.

At this early stage, it’s unlikely your startup will qualify for a bank loan. Banks typically look for 3+ years of business history before even considering extending credit.

So if you’re an ambitious founder who doesn’t fit the mold, how can you raise pre-seed or seed funding?

Fortunately, a new wave of seed funding sources is emerging, designed to be more accessible and more founder-friendly. Here are 5 alternative ways to get seed funding for your startup.

Republic

Republic leads the venture crowdfunding space. It’s a platform app that lets startups raise capital through crowdfunding from individual and institutional investors. Said more simply, it’s Kickstarter for startups.

This crowdfunded approach lets startups raise pre-seed and seed funding from a healthy network of enthusiastic investors, without needing to spend hours on pitch meetings.

Republic does require startups to go through a tough screening process; only around 5% of startups will be accepted. That said, they do offer a unique opportunity to get in front of a lot of different investors quickly, without needing to pitch each individually. It’s a tough but streamlined way to get seed funding for your startup. Learn more about how they evaluate startups here.

If you decide you want to apply, you can do so here.

Chisos

Here at Chisos, we’re offering a brand-new way of investing in idea- and early-stage startups through a two-part approach we call a CISA. The CISA is a unique combination of equity and an income share agreement. Unlike other investment options, you can qualify for pre-seed and seed funding from Chisos even before you have a product or any revenue.

We’ve designed the CISA to be fair to founders. Here’s how:

-Repay the CISA with a percentage of your income, but only when that income is above $40K.

-When you repay the CISA, you’re also buying back some of the equity initially granted to Chisos.

-You have complete freedom to use the capital as you see fit.

-You’ll never pay more than 2x the original investment amount, adjusted for inflation.

We’re built on the idea that funding shouldn’t be limited to a tiny handful of founders. Instead, we’re on a mission to democratize entrepreneurship.

We’re writing checks of $15,000-50,000 to invest in idea-stage startups and side-hustle businesses. Want to see if you qualify for pre-seed or seed round funding?  Apply here.

KnowCap

If you’re planning to use seed funding to hire a team, why not skip a step and trade equity for expertise? That’s the thinking behind KnowCap. KnowCap connects companies to a team of startup experts that cover key functions, including marketing, sales, engineering, and strategy.

These experts work directly with founders to provide coaching, strategic guidance, and in many cases, actually creating value by building an MVP of the product, creating new brand identity, and setting up calls with potential customers. In exchange for access to this “knowledge capital,” founders grant KnowCap equity.

While it’s not pre-seed or seed funding in a traditional sense, it’s a great alternative to help founders build a strong foundation from which the company can grow.

Learn more about KnowCap here.

Zebras Unite

Zebras Unite is a startup co-op that’s built explicitly to serve founders that traditional VC overlooks and undervalues; namely, women and people of color. What started as a community has evolved into a source of capital.

You’ve probably heard startups described as “unicorns”; Zebras Unite is an intentional rejection of the unicorn model of success. (You can read more about this concept here.)

Zebras Unite is the place for founders who believe that business should support society, rather than define it. If you’re building a community-focused, mission-driven organization, you’ll probably feel right at home in the Zebras Unite ecosystem.

To be considered for funding, join the Zebras Unite online community.

State & Federal Startup Grants

There is a bevy of grants for early-stage startups and small businesses. Unlike most other seed funding sources, grants don’t require you to give up equity or pay the money back.

Startup grant programs typically focus on serving otherwise underserved groups, such as minorities, veterans, people from rural communities, and non-profits. They also typically focus on advancing specific sectors, like education, technology, and healthcare.

Unfortunately, there’s no central database that covers all available grant opportunities, so you’ll need to spend time researching if you pursue this path. Here’s a list of a few good places to start, including:

Grants.gov

OpenGrants

Challenge.gov

SBIR.gov

So that’s it! Now you know 5 new ways to raise seed funding for your startup.

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William Stringer is the Co-Founder and CEO of Chisos Capital, a company that invests in ideas, and the founders with potential to bring them to life. Through our proprietary investment approach, the CISA, we write checks to idea- and early-stage entrepreneurs. Inspired by the desert oasis of the Chisos mountains, Chisos Capital seeks to democratize opportunity.

small business

Three Reasons You Should Support Small Business

Small Business Saturday takes place this Saturday, November 30

Every year, when Small Business Saturday rolls around, Americans are reminded to ‘support small businesses.’ But the need for your support extends far beyond the holiday season.

American small businesses are the backbone of the U.S. economy. In fact, they make up 99.9% of the economy and employ 47.5% of the workforce.

As a small business owner, I’ve built much of my career around serving the incredible community of entrepreneurs who drive innovation and economic progress, locally and nationwide. These men and women are the hidden heroes of our neighborhoods, often putting everything on the line to provide the services and staples that we rely on…not to mention, those which make our communities unique. It is they who pass the torch of the American dream to future generations — all of whom fight to defy conventional wisdom that only half will survive their first 5 years. Make no mistake about it: they depend on your support to hold onto that dream.

Here are three reasons you should support small business, and go out of your way to contribute to Small Business Saturday every day.

Small Business Owners Drive New Jobs

It’s no secret that small businesses create new jobs, fuel economic growth, and contribute to lowering unemployment rates. Even in today’s globalized world, America’s 30.2 million small businesses still make up 99.9% of all businesses in this country, and employ 58.9 million people.

Check out ‘The Best Small Places For Business And Careers’ in Forbes, to see where our city ranks. None of us should be surprised that we have an incredible workforce; we are well below the national unemployment rate; and that most of our 16+ population is in the civilian labor force. There’s no reason not to keep this momentum going and drive more business and more jobs to our area.

Small Businesses Strengthen Communities

It’s not the megastores that give our communities vibrancy; but rather, the mom-and-pop coffee shop that serves a great cup of morning joe, the family-owned pastry shop that’s been a local staple for decades, and the go-to-guy auto mechanic that give our communities personality, and a spot on the map.

Small Business Saturday is a community-centric day, where we have the opportunity to rally around our local small companies that make our lives a little bit better. So long as the community connection created by small businesses remains strong year-round, the benefits of strengthened communities will too.

Small Businesses Empower the Next Generation

Almost all of us got our start at a small business, whether it was helping out the family, as a cashier at the local movie theatre, waiting tables, working in the local bank, or even babysitting! We learned the basic skills and requirements of the workforce: showing up on time, working hard, being accountable, and leading others (and being led). It is still incumbent upon small businesses to perform the vital role of training the next generation and offering them mentorship opportunities and ways to learn professionalism.

 Things have changed a little since my first days as a neighborhood lawn mower in my hometown. Still, today, I scout for great small businesses everywhere I go, which was why I came here. I have found that small-business owners here understand best what it takes to make an area a real community. To me and many others, that’s an important public contribution and one I hope to never live without.

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Vincent Ney is the Founder and President of Expansion Capital Group, a business dedicated to serving American small businesses by providing access to capital and other resources, so they can grow and achieve their definition of success. Since its inception, ECG has connected over 12,000 small businesses nationwide to approximately $350 million in capital.