The last few years have been perfect for the Indian startup ecosystem with a large number of startups getting quick and quality funding from seed investors in India. Earlier, raising a seed round took months, and now the same is getting raised in a matter of days.
But how does this seed funding boom impact Series A fundraising? What is the impact of a higher number of seed fund investors on Series A?
What is the Impact of the Seed Fund Boom on Series A Funding in India?
Globally, as well as in India, the seed fund boom has led to a Series A crunch. The easy, quick, and sometimes huge amounts invested by seed fund investors can lead to a false perception amongst entrepreneurs that it is easy and quick to raise any amount through Series A as well.
The number of companies receiving investment from seed fund investors has gone up. However, Series A capital and rounds have not gone up at the same pace. That means, more seed-funded companies are now competing for the same amount of Series A funds, thereby making it harder to secure the required funding.
The recent boom in India’s startup ecosystem saw many startups getting through a fast and hyper-competitive seed funding round and receiving the needed amount of funding from seed investors in India. However, once they move to Series A, they are in for a rude awakening. Seed fund investors check the business idea, team structure, and much more, whereas Series A is all about data.
Series A fundraising involves proving your product quality, growth capabilities, financial strength, use of seed money, inflection point hits, and so on. Most founders have not yet established enough credibility to get more money. As a result, they end up raising much lower than what they had hoped for and even that takes months to finalise, which in turn can impact their long-term growth prospects and success.
How can entrepreneurs work around this?
Founders should capitalise on the seed fund boom and their newness to raise a large amount during the initial round of funding and ensure a longer runway to implement their strategy, meet goals, and hit all the critical inflection points. Furthermore, partnering with the right seed investors can help open a lot of doors, develop networks and contacts, and get support through the Series A pitch process.
Finally, founders should chart out a clear picture of their business goals, inflection points, and traction which are required for Series A funding. The data must undeniably de-risk and prove their business concept and show a growth in valuation.
Founders can take the help of investor and entrepreneur networks to target the right proof points to ensure a well-curated pitch. Businesses can also team up with integrated incubators like Venture Catalysts which have created a 360-degree ecosystem that supports businesses through incubation, funding, business development, as well as acceleration.
Conclusion
Founders need to remember that the seed funding boom will not translate into easy, quick, or assured Series A funding. The best way is to exploit the higher interest from seed investors in India and raise a good amount of initial funding, ensure a longer runway to implement and hit necessary milestones and put in enough time and effort to build a good Series A pitch.
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