How to get seed funding for startups | Summary and Q&A

TL;DR

Learn key considerations for planning your capital raise, including hiring and onboarding costs, legal and regulatory expenses, upfront business expenses, unit economics, and maintaining a 25% buffer.

Key Insights

• 🌱 Prepare an 18-month hiring and onboarding plan to ensure conservative capital planning.
• ❓ Legal, regulatory, and transaction closing expenses should not be overlooked.
• 😄 Upfront business expenses, such as leases and specialized software licenses, may disrupt cash planning.
• ✅ Conduct a unit economics check to avoid unrealistic revenue and profit assumptions.
• ❓ Maintain a 25% buffer on aggregate expenses to account for unforeseen circumstances.
• 👻 Cloud hosting costs can scale linearly, but other expenses may require upfront payment.
• 💐 Revenue growth and profit margins may deviate from initial projections, impacting cash flow.

Transcript

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Questions & Answers

Q: What should you prioritize when planning your capital raise in the seed and early stages?

When planning your capital raise, it is crucial to prioritize an 18-month hiring and onboarding plan, ensuring you have enough resources to build the best version of your product.

Q: What expenses should founders be cautious about besides business-related costs?

Founders should pay attention to legal, regulatory, and transaction closing expenses, which are necessary for company incorporation, establishing the right entity structure, and obtaining licenses.

Q: How can upfront business expenses impact cash planning?

Upfront expenses like leases, infrastructure costs, and specialized software licenses can create significant financial burdens, potentially hindering hiring plans and other growth initiatives.

Q: Why is conducting a unit economics check important?

By conducting a unit economics check, founders can avoid assuming linear revenue growth and gross profit margins. This check helps account for potential delays, smaller revenue flows, and discounts given to initial customers.

Summary & Key Takeaways

• Prepare an 18-month plan for hiring and onboarding, focusing on costs to ensure conservative planning.

• Be aware of legal, regulatory, and transaction closing expenses necessary for company incorporation and raising capital.

• Account for upfront business expenses like leases, infrastructure costs, and specialized software licenses that may disrupt cash planning.

• Conduct a unit economics check to verify revenue and profit assumptions, considering factors like delayed revenues and lower profit margins.

• Maintain at least a 25% buffer on aggregate expenses for unforeseen circumstances.