Financing Your Idea

If you’re daydreaming about turning your app or industry-disrupting project into a successful business, you’ll find plenty of advice (good and bad) in almost any direction you turn.

But what if you don’t even have a marketing plan or a product prototype in hand just yet? What if you have absolutely nothing on your desk but a clever idea and few supportive teammates who can help you bring your plans to life? In other words, what if you’re so early in the process that you assume potential financiers will laugh and tell you to come back in three years?

Take the first steps.

As with any project, financing a startup can be broken down into a series of manageable steps, and the first step is the easiest: get help. Contact a firm that can walk you through the early stages (the VERY early stages) of the process. And once you’ve done that, your legal counsel can help you set terms and pitch your idea to VCs. The right lawyers can also help you understand how early stage equity financing -- and in particular, Series Seed or Series A financing -- can make or break a venture.

We’ll discuss some of the characteristics and distinctions between classic Series Seed and Series A financing in the next blog, but for now, recognize that seed rounds typically involve the support of up to 15 investors who contribute small amounts—with total financing anywhere from $1-$3 million—and receive some very basic investor protections. Series A financings typically involve higher investment amounts, but also carry with them far more stringent investor rights.

A great Series Seed round can help early stage startups get the capital they need for initial market research and the development of a functional business model. It can then lead directly to a Series A round. Alternatively, a venture may feel prepared to jump directly to a Series A financing, if it is fully prepared to say yes to a large influx of capital and to the investor rights and protections that often accompany that capital (including board seats, cumulative returns, and possibly drag-along rights).

Stay tuned for more detail on this critical early stage decision. In the meantime, recognize that no matter how new and untested your idea might be, it’s never too early to start reaching out for support and putting your plan into action.