How software startups should go after seed funding?

How software startups should go after seed funding?

There’s a tired approach for how software startups go after seed funding, and investors are both weary and wary of it. It goes like this: 1-Startup founder has an idea.

2-Startup founder bootstraps (self-funds or obtains funds from friends, family, or associates) enough to do basic R&D. 3-Startup founder finds early investors interested in mobile or software and shares vision and skeleton plan in order to obtain enough funds to build their v1 (first version) app or software. Rinse and repeat until the startup obtains funding.

4-Startup founder brings together a team to build a v1 app based on the objectives delivered to investors.

5-If, during the build process, it becomes apparent the app cannot succeed (countless potential reasons for this), considerable funding is already lost due to the expensive build process. If not…

6-The app launches, and the market either loves, hates or is indifferent to it.

This approach is why the gross majority of software startups fail and why many investors either limit their funding amounts or step back altogether from funding software projects. Building a V1 is expensive, and the risk of failure is great.

Flaw #1: Basic R&D What do you think of as the minimum amount of research you need to prepare to obtain seed funding from investors? Unfortunately, most startup founders are on opposite ends of the spectrum, either leaning too heavily on the flash of their idea with not enough research to back it or getting stuck in a research hole that drains funding and life from the project before even attracting funding. The perfect balance is difficult to achieve.

Flaw #2: Funding Difficult to Obtain Funding a v1 is costly, and getting investors to put up enough funding to build the v1 is challenging. It’s much easier to get a smaller amount, but when you start going after larger funding, expect the process to be rigorous.

Flaw #3: Learning While Building Once funding is obtained, most startup founders lead their team right into development. This means that teams are planning and building simultaneously. Learning “on the fly” or in response to a feature or series of features that has already been built leads to reworks. Too many reworks can bankrupt a software project.

Investors do not appreciate when a startup founder has to come back for more money before the project is even launched.

Flaw #4: Launching with Limited Clarity Getting funding on the premise of building a v1 app doesn’t leave much time for the kind of up front idea validation, market research, understanding the competitive landscape, end user research, testing, and clarity development required to build a minimum lovable product (MLP). If you’re shooting for anything less than a minimum lovable product for the end users, you’re likely to end up in the failed category.

Instead of seeking far larger investments for building a v1, consider going after just enough funding to pay for an

Innovation Lab with ENO8’s experienced team.