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Mistakes to Avoid in Handling Seed Money

mistakes to avoid handling seed funding

As a budding entrepreneur, you know how hard it is to raise money for a business venture. Investors are particular about every little detail and getting things to roll for your startup is such a nightmare initially! However, it is all worth the hard work once the seed money is parked in your account. It is like the green signal on the board after waiting for an infuriating amount of time at the crossing just when you are running hard-pressed for time.

What do you do then? Do you rush ahead without any semblance of following traffic rules? No! Despite your wait and the surge of relief, you need to be cautious and tread carefully. Otherwise, you will end up causing more damage than you can think of. The analogy is so true for startups and entrepreneurs. Things can go horribly wrong with the seed money that you have already acquired. The entrepreneurship wing of 7boats comes up with some common mistakes of handling the seed money, and how to tackle them.

Tip #1: Do not change priorities

This is definitely up there as the most common mistake. Once you have the seed money, usually a large amount, you are tempted to go big. You want to scream out your business from the rooftops. The danger is, you might bite out too much too soon! The money is not just about PR and advertising. You need to use it to develop your business and product. The general temptation is to spend heavily on media coverage and promotional material because that is where the glamour is. Make sure you don’t change your budget or priorities once the seed money rolls in.

Tip #2: Update investors

The investors who have dished out the seed money require updates. You cannot go AWOL as soon as the money is cleared out into your account! These investors have to answer higher up the chain. They need to know what you are doing with the money. Moreover, you need to be on the same page as the investors. It is your obligation to stick to the business pitch that you made them when asking for the seed money. If you go wayward, they will feel insecure, even betrayed. That will not bode well for your business’ finances in the future.

Tip #3: Climb too fast

Business ideas can fly off the handle in tangents. The business on the ground cannot. Unless you bolster your credentials and tangibles on the ground, you should never scale up operations simply because you have the financial backup to do so. You learn your business even more while you work on it. Scaling up will carry heavy risks of bleeding money through leaks you have never ever thought of. Keep things under control till you gather enough experience to scale up operations.

Hope these tips will help you handle your seed money better! You can speak to our team for more insights on launching startups and cutting your teeth as an entrepreneur.

November 30, 2016

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