Paurush is a seasoned digital marketing professional and a successful investment banker. He is the Founder & CEO of Stallions Capital, Dubai. At Stallions Capital, the core purpose is to assist founders from the MENA region to raise funds from VC’s & Investors at pre-seed and seed stage. Paurush has been at the forefront of assisting entrepreneurs under the Stallions Capital brand and is also an avid Investor himself. He guides, mentors startups, and allows them to grow and become brands which are not just profitable but also credible.
As Founder of Stallions Capital, we focus on start-ups across the MENA region, and we specialize in pre-seed and seed funding deals.
Before we begin let us understand seed funding, as the name suggests seed fund is the very first investment that a start-up raises / receives.
Most entrepreneurs begin a start-up and invest money into it, however the resources needed to launch a start-up might be beyond the reach for some founders and that is where Pre-Seed and Seed funding come into the picture.
Generally, seed funding is done when the start-up is an idea in the form of a pitch deck and the basic groundwork is done. The seed fund is used to give concrete shape to the start-up and the outcome of most pre-seed funding is an MVP; Minimum Viability Product.
There is a thin line of difference between pre-seed and seed, the typical amounts are in the range of as low as 50k USD going up to 500k USD. This is not a benchmark but true in majority of the cases.
Seed Capital and its Importance
Most great start-ups never make it beyond an MVP for lack of capital and that bridge is what can be covered by pre-seed and seed funding.
Let us take a typical example to understand this better.
- Simon has a FinTech start-up and has invested 100k USD from his savings and a few friends & families supported him; also known as raising from friends & family OR friend & family round. This could also be considered as pre-seed as this funding was used to build the product.
- Simon has now built a great product and technology.
- He has informally via his network on social media and other platforms got 500 users to download the app and test; beta testing / user testing / uat.
- Some of them were kind enough and gave him honest feedback which allowed Simon to fine tune the product.
- Simon now had a great product and is ready to launch, his first step now is to do the below:
- Get the relevant licenses as it is a FinTech from the regulatory authorities.
- Launch a campaign to target 100k downloads.
- Purchase some software to provide customer supports; chatbot, CRM, etc.
- All the above is going to cost him 500k USD and this is where Simon now cannot do any of the above until he raises a pre-seed / seed round.
A pre-seed / seed round shall allow Simon to raise 500k USD either from private individuals or VC Firms that specialize in pre-seed and seed deals.
How would Simon get the Funds?
- Simon would get a valuation done for his company and let us assume the valuation comes to 2.5 Mn USD.
- Simon would then create a pitch deck with details about his start-up and begin reaching Angel Investors and VC Firms.
- The prospective investors shall allow Simon an opportunity called ‘Pitch’.
- Simon would present the company, the business plans and all the details and make an offer to the VC’s which can be termed as ‘Fund Ask’.
- Simon would offer 20% of his company for 500k (Do the Maths – 20% of 2.5 Mn).
- When an investor would provide Simon with 500k, they would own 20% of the start-up.
How does Angel Investing / Pre-Seed / Seed Investing benefit the Investor?
As a seasoned Angel Investor & Founder of Stallions Capital, I can vouch for the benefits of investing in start-ups early on.
When in doubt remember the old idiom ‘The early bird gets the worm’.
- When you enter at a pre-seed / seed stage you get a bigger share & say in the company.
- At this stage you get to work with founders closely and play a role in the company. While this might not excite a VC Firm with a huge corpus but for angel investors especially hands on investors this is a huge factor.
- However, don’t get too involved with the start-up and allow the founder to work with the highest level of freedom.
- Remember as an early investor you can get more than just funding to the table; get connections, get knowhow, allow founders to dip into your expertise, get them introduced to other fellow investors. In simpler words, go beyond just funding.
Remember while this is the riskiest form of Investing, the returns far out beat most other investment options.