The term seed capital refers to the type of financing used in the formation of a startup. Funding is provided by private investors—usually in exchange for an equity stake in the company or for a share in the profits of a product. Much of the seed capital a company raises may come from sources close to its founders including family, friends, and other acquaintances. Obtaining seed capital is the first of four funding stages required for a startup to become an established business. A company that is first starting out may have limited access to funding and other sources.
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Every business goes through a number of changes in the course of its lifetime and it makes sense for businesses to understand exactly where they are in the cycle so they can prepare for the next stage. The seed stage of your business life cycle is when your business is just a thought or an idea. This is the very conception or birth of a new business. Challenge: Most seed stage companies will have to overcome the challenge of market acceptance and pursue one niche opportunity. Do not spread money and time resources too thin. Focus: At this stage of the business the focus is on matching the business opportunity with your skills, experience and passions. Other focal points include: deciding on a business ownership structure, finding professional advisors, and business planning.
You will have to be flexible in your thinking and adapt your strategy as you move along. Indeed, different approaches are required for market penetration versus, for example, what may be required to achieve growth or retain market share. Understanding your position in the business lifecycle just might help you stay a bit ahead of the game here and defy the odds, as you anticipate the potential challenges and obstacles that are upon you or are on the way depending on what phase you are in or about to transition to.
A small business goes through various stages of development, facing different cycles throughout the life of the business. What you focus on today may not be what's important tomorrow, and your challenges will change and require different approaches to be successful. You need to be able to anticipate upcoming challenges and financing sources you will need to succeed at each stage of the business lifecycle.