Hiring Professional To Help Obtain Seed Capital: A Cost Benefit Analysis

To many new business owners, hiring someone to help obtain money seems counterintuitive. After all, the goal is to minimize expenses and use the smallest amount of money possible in order to leave maximum funds available for other projects and company needs. Although sound in some ways, that kind of thinking neglects one significant fact: having professional assistance can increase the amount of seed capital a business is able to obtain and may pay for itself in the end.

The Real Value Of A Seed Capital Professional

Finding investors is an incredibly daunting task, especially for a first time business owner with limited connections. In the early stages, most capital funding comes from personal connections more than anything else. Family, friends, and to some extent angel investors cover the earliest needs, but many startups don't have the kind of connections that are required to fund a new initiative based on that alone.

That's where a capital funding expert comes in. He or she will have the kind of connections required, and they'll be experienced and knowledgeable about applying as well. They help bridge the gap between the current funds that have already been gathered and the funds that can be obtained. In addition, he or she should know about any Federal, state, or local initiatives designed to help small businesses develop. In many cases, there are funding programs that can be applied for and obtained, but researching them takes time and applying can be complex. Retaining a specialist takes the burden off the business owner and allows funding to be sought with less hassle.

DIY Capital Funding

Obtaining seed capital without the assistance of a professional is certainly possible. There are many startups that have succeeded this way, in particular web-based companies. If overhead is particularly low, or if the business owner has substantial wealthy connections or prior experience with angel investors, it may be possible to obtain all of the required funding with relatively little effort.

Is going without professional guidance viable or wise for business owners without these connections and experience? History tends to indicate that it is not the best choice. Without proper seed money, even the most ingenious company will falter and ultimately fail. Having proper capital funding is a necessary prerequisite for success. Many novices make the mistake of blaming the failure of their startup on a flawed premise or poorly developed idea when in fact the fault lies with a simple lack of funds.

Determining Whether A Business Has What It Needs

Understanding how much capital funding a new venture requires is one of the most difficult tasks a new owner (or venture capitalist/funding professional) will face. There are some costs which are relatively straightforward: renting space to hold inventory, obtaining the necessary items to begin assembly of products, etc. However, many of today's businesses don't require inventory at all and don't sell tangible goods. How much capital is required to manage and support such a venture? There is no clear rule. Most experts recommend attempting an estimate, but deliberately erring on the side of requiring more funding. New ventures typically encounter unexpected problems, delays, and crises that inevitably require added funds.

When in doubt, talking with a professional is usually the best course of action. Professionals may seem like an unnecessary cost at the beginning of a company's life cycle, but their guidance and experience often leads to significantly increased cash when the startup needs it most.