“Seed money” is for growing your business — not your garden.
How much is a company worth now? How much is it going to be worth in the future? Itʼs a magic number that investors want to know and sometimes the more inflated it is, the buzzier a company can be. There are most often three ways to determine the valuation: 1) market, or how many people want it; 2) management, or how good your people are; and, 3) opportunity, or how awesome is your company compared to the competition.
2. “Seed money”
As cheesy as it sounds this is the seed to make your company grow. Itʼs the initial dough your friends and family shell out to get you started. More often than not, credit cards pick up the initial seed money, typically $50,000-250,000.
3. “Sweat equity”
E for effort. Time is money and no one is going to care more than you. So you work 20 hours a day — that time is yours and youʼre not paying someone else to do the same thing, which saves you money and also increases the equity or worth of your company.
4. “Venture Capital”
This comes after seed money. And if you need it, itʼs not “selling out” but you are relinquishing control of your idea to take money from a Venture Capitalist or a Venture Capital firm. The VC will give you the money you need if they think you have potential (i.e. ability to make them money).
So, not as obnoxious as a typical traveling act, but similar. Itʼs taking your show (presentations, elevator pitches) on the road. Remember, not all investors are in San Fran or New York; there is a big hub in Boston, for instance, and elsewhere depending on your niche. You are holding meetings with potential investors and building hype, telling them how your company/idea is the best thing since Microsoft. Youʼll hear the term a lot before a company goes public.
Nicole Lapin is the founder and CEO of Nothing But Gold Productions, a multi-media company that creates accessible financial content for TV, print and digital outlets. She is also the editor-in-chief of Recessionista.com, the only online destination that provides non-judgey female-focused money news. Sources say she was the youngest anchor ever on CNN and CNBC. Follow her on Twitter @nicolelapin.