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Right time to look for seed funding; here’s why?

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The year 2016 has been challenging for startups, with a massive fall in funding, the lowest since 2014.

According to the reports, it’s not all bad news, despite the $24.1 billion drop in funding globally, many predict a stabilisation of the seed funding market, which is giving more confidence to both investors and entrepreneurs. Many expect to see the market rebound, if not at the end of 2016, then early next year. So this might exactly be the right time to look for seed funding for your next venture.

Here we have 7 reasons why now is the right time for you and your company looking for seed funding:

1. Health and consumer tech in India

If this is your target market, then be merry. The last two quarters of 2016 have seen a huge increase in these markets. Unlike bygone years the Indian startup market is not about exporting cheap labour; they are instead developing solutions for the Indian consumer. The problem-solving minds of entrepreneurs are important in tackling some of India’s biggest problems such as healthcare and education. And, this is where Indian startups differ from those in rest of the world.

2. Despite a general decline in funding, startup funding increased

The interest in innovation and fresh ideas is not waning despite the difficult financial times.  Anand Sanwal, CEO of CB Insights, says, “Companies and corporations are still interested in innovation and outsourcing research and development to startup companies”. Brian Hughes, A National Partner to KPMG suggests, “Companies are realising the importance of investment in startups to further their own interests and beat the competition”. Many companies are realising that early investment, may turn out to be beneficial to them later on. While the increase in early funding may only be small compared to 2015, it offers new companies hope that there is a light at the end of this gloomy tunnel.

3. Fewer investments, but investing more

The number of seed deals dropped in 2016 for the first time in 5 years. But market figures show that although the number of deals fell, companies appear to be investing more in the start-ups. This may be linked to the increased yield that these companies are seeing from these investments, 50% up when compared to 2015.

4. Costs of starting a business are lower than ever

Almost a decade ago, startups would have spent 70% of their capital on infrastructures such as office space, web domains and personnel. Now, this figure drops to around 1% of a new business’ budget. But Ian Gardiner, of Amazon’s Web services, warns, “The drop in running costs, means there are more startups out there, meaning more competition!” 2016 certainly saw an increase of 25% in the number of new startups when compared to the previous year.

5. More funding options available

Crowdsourcing or funding involves sourcing funds from many different donors and with more than 500 crowdfunding platforms out there, entrepreneurs are spoilt for choice.  Alternatively, Super Angels, such as LinkedIn’s founder, Reid Hoffman, offer funding and sometimes mentorship to startups in the same niche as their own companies. Their aim is to improve their own companies but also to bolster their professional portfolios.

6. Emerging business accelerators and incubators

Other than small investments, business accelerators also offer new businesses mentoring, workspace and other business services. Established companies such as YCombinator and TechStars look specifically for startups in the seed funding stage and provide funding in the region of $25000.

Business incubators, while relatively new, offer a similar service to accelerators, but tend to be more open-ended than the typical 90 days to four-month window offered by business accelerators.

Bigger companies such as Intel, Google and FedEx are now branching out into seed funding too.

7. Longer term investment

While there are fewer investments in startups this year, the money companies are investing is higher and so these companies want more assurances. The state of the market means investors may be more cautious with their money but are likely to invest for a much longer period. This is good news in a year where almost 1000 startups folded due to a lack of constant funding.

There is no denying that applying for seed funds can be one of the most difficult tasks for startup businesses. But without this early funding, many startups would fail, so it is considered a necessary evil by most. Despite appearances, now may be exactly the right time to secure capital for your startup. Now is the time to get searching and preparing for that big proposal!

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