Startup Seed Funding Part 1 - What are the Difficulties for Founders after Startup Seed Funding

Startup – a term that has been particularly in recent years in Vietnam by its movement. Parallel with the development of technology, many start-ups have been established and grown. However, only about 10% of them can pass the seed round stage of the business to continue with the next round of funding.

What are the difficulties after a seed round which founders need to overcome? Let’s find out with FinFan in this essay.

What is startup seed funding?

Startup seed funding is the first round of capital calls in enterprises’ lives. That contributes to determining the success or failure of the business in the future when the capital in this round will be used to finance the early stages of a startup's development, such as product development, market research, and business development.

How important is the seed round of a startup’s life?

A seed round fund is very important for a startup when it has sufficient capital for many segments in the first stage of a business. With this, the startup can:

• Research more about its market and offer solutions to attract customers to continue using its services.

• Review the product production stages as well as improve the quality to prepare for the market.

• Research and have contacts with more potential customers by upgrading the customer research management system (CRM).

For those reasons, the seed round fund contributes greatly to the success or failure of a business when it helps to shape the direction of startups before the series round.

What are the difficulties for founders after startup seed funding?

How can the founders calculate the capital to be used?

After founders receive the capital from investors in the seed round fund, they need to calculate in detail what part of the money is for which field of the business.

For example, they can calculate 25% of this capital will be used for marketing, 25% will be used for human resources, 25% for products’ R&D and 25% of reserve capital for 6 months. The above formula can be substituted depending on the business and the business situation.

If the founders can’t calculate well to divide the capital, the enterprise may become to be more difficult and use up the invested capital which leads to bankruptcy.

Especially, enterprises need to be developed a fast and strong brand identity to resonate in the market, therefore the founders can spend too much on marketing and ignore the rest. That can lead to difficulties in improving products and using suitable people and the enterprises may fall into crisis in dealing with customer problems about their products and services.

How can the founders boost employee morale after receiving their first big investment?

After receiving the first big investment, the capital in your budget is bigger than before, then you try to think about how to apply different policies to employees who have been with them for a long time.

However, that lead to many problems after they decided to make that wish:

• How to increase salary and commission so as not to lose old people and attract new talent?

• How to retain good employees who have worked hard in the past time?

• How to keep the company united and united towards a common goal?

If the founders do not solve the above problems, the company's business situation will worsen due to increasing internal conflicts.

How to keep the company on the right track despite going through difficulties in the market?

After startup seed funding, founders are not only careful with the inside situations but also face external difficulties.

Imagine that you have just received investment capital when COVID-19 hits. At this time, if you are a consumer manufacturing company, you must suspend the production of some products due to the state's blockade order, and workers can't get to the factory or the processed goods arrive late.

Vietnam’s government designation also affects the service industry too when some services can be stopped working like travel, aviation, etc.

However, this can be a big opportunity for technological services like fintech, ecommerce, technology motorbike taxis, food delivery apps, etc. when the demand for human use in the above period is very large.

The problem that founders must serve here is understanding the value that your business brings to customers, after that calculating the appropriate capital preservation strategy or enhancing image promotion and service improvement to seize the opportunity in this difficult period.

Here is information about the startup seed funding. FinFan hopes that with this sharing, we can help the startups’ owners to overcome the difficulties when running a startups and will become unicorns in the market soon.

This article was curated and authored by FinFan's market research and development team, alongside our marketing department.

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