Finding Seed Money

By Laura Duggan     Add your comments

Several big players now offer significant packages to start-ups that are just in the incubation stage. Spartina summarizes your options and how to apply.

It’s best to be creative and explore all possibilities when looking for money for your start-up. It is also important to know that all money is not the same- each offer for financing comes with its own terms. Make a smart decision by understanding and comparing the options. Decide what terms you can live with, and then explore the possibilities

Note that there is a difference between seed money and professional venture capital. Most of the programs listed below are offering true start-up support. They will offer you the money to fund the initial stages of forming the company, creating your plan and then approaching serious Venture Capital Funds. A key part of seed money is providing the start-up with mentors, ideas and suggestions to start the company off on the best foot possible.

If your product or service is in the technology or digital field, here’s an overview of seed capital funds to consider:

Name & Location Number of companies fund to fund Area of special interest Amount of Funding Terms
LaunchBoxDigital6 – 10Web and Mobile business, or any digital platform$15k - $30k4-8% of equity; 12 week seminar required
Y Combinator, Cambridge, MassAveraging 6-10 a yearSoftware and Web Services;2-4 person companies with a good idea$5k + 5k per founder2-10% of equity,3 months relocation to Cambridge or Bay Area
SeedCamp, London5 companies, out of a competition of 20Internet products; 2-5 people; European companies (ie, willing to set up shop in Europe) €50K10% 3 month relocation to London
TechStars, Colorado10 companies per summerTechnology oriented companies$5k per founder, up to three founders5%; Summer in Boulder
Charles River Venturesn.a. Information Technology; 0-9 people$250,000 loan (convertible note)
DreamIt Ventures, Philadelphia12Early Innovators between $10,000 and $30,000 4% to 8% passive equity
Captial Factory, Austin 3-5Technology$20k5%; mentoring;10 weeks in Austin

How do you qualify?

For Y Combinator, in addition to filling out the application, they say this:

  • “The people in your group are what matter most to us. We look for brains, motivation, and a sense of design. Experience is helpful but not critical.
  • Your idea is important too, but mainly as evidence that you can have good ideas. Most successful startups change their idea substantially.
  • We’re more likely to fund people we know are smart from their submissions and comments on Hacker News. In fact, that was one of the main reasons we wrote it: so that we could get to know people before they applied."

For SeedCamp, some of the criteria on their website are:

  • You must be a developer, or your co-founder must be a developer, or you must have identified a specific developer who has the ability to deliver a prototype of your product or service.
  • Your product or service must make use of the Internet, preferably in a new and exciting way.
  • Your project must never have raised serious money from an institutional investor
  • You should have a prototype to show us before you apply. Mention it in your application.

LaunchBox Digital says this:

“We have a simple, straight-forward application process. We care most about the quality of your idea (boldness and simplicity are two characteristics we’ve seen correlate with success), and the talent and commitment of you and your team. This is as much a bet on people as it is on the idea. If you have some initial design/software done, that’s great—we’d love to see it.”

TechStars

“We fund technology oriented companies, typically these are web-based or other software companies, but we’ve funded companies that don’t quite fit that mold as well. We’re also looking for companies that can have national or worldwide reach. Specifically, we don’t fund medical device companies, biotechnology companies, restaurants, consultancies, or other local service oriented companies.”

Charles River Ventures

“What we do look for is outstanding people, with a vision of how their company can play a role in the evolving technology and business landscape. It’s really that simple. The best way to get our attention is not with a 100-page business plan, but rather to network through someone in our portfolio.

Because the lay of the land changes so quickly in our key industries, a detailed business plan is often a futile exercise. Instead, a concise executive summary, an expense budget for the first two years, the revenue model, and a PowerPoint presentation are generally the materials we’re interested in seeing.”

DreamIt Ventures

“As we review applications we are going to focus on the following questions:

  • How BIG is the idea?
  • How big is the market opportunity?
  • Can you complete a prototype, beta or market-ready product within 3 months?
  • Is the team comprised of bright, capable, enthusiastic people with whom we can work?

Capital Factory

"We like lean companies that can get to profitability quickly and can scale rapidly. Most of us have technology backgrounds and while it is not a requirement, it is very likely that the companies we select will have technology components to them. We're happy to start with just an idea on a napkin, but we'll also work with companies that have some customers or angel investors and are now ready to scale their business. ...Most importantly, we want to get involved with companies that we can have the biggest impact on."


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