How much do startups need from fintech investment funds in seed funding?
Seed funding is the first period of funding in which fintech startups need money to operate and develop their services. So, they need more money in the beginning.
How much that they need and how can they spend the funds properly? Let’s find out with FinFan in this essay.
Factors affecting the amount of capital a fintech startup needs.
Market research
Once the seed funding phase has passed, the company needs to have a customer survey team again to better understand the problems the market is having with its service at the beginning. After that, they need to discuss more with the technical team to fix bugs and upgrade their products.
Service complexity
After the market research when the fintech startup companies have more complex services or too many defects in products and services that need to be fixed, they need more staff for the dev team to complete them, not to mention the time to fix bugs.
For example, when a startup wants to create a digital bank, they need to program a payment system that can be used not only domestically but also sometimes can be used for cross border payments, and at the same time have to integrate other utilities such as paying for essentials and sometimes other needs such as investment, insurance, loans, etc.
The most important thing is that the eKYC system of digital banks needs to be AI programmed for a long time and it is very expensive. Right now, they need a lot of money to upgrade better services for users.
Build brand awareness.
Every product needs the support of users to last for a long time. Therefore, they need to spend marketing money to pull users to use their services (this stage is called burning money to attract users).
However, if the brand skillfully applies some effective marketing strategies, at this stage they will avoid the above problem and still have a place in the hearts of customers.
For example, with a good strategy, MoMo (FinFan partner) has attracted users with a low-cost marketing strategy that turns grocery stores into MoMo's point of sale. This is clearly a very smart strategy, as MoMo has surpassed some other big players with more cost potential to lead the ewallet market.
How Much Money Do Fintech Startups Need?
The founders will negotiate with investors about the amount of money they need to spend and the percentage of shares in the firm that investors will receive after the above arrangement, depending on the specific situation and the capital owned by startups.
Fintech (if doing B2C) is also an array of money burning to attract users, as evidenced by the fact that MoMo itself is also burning a lot of money to attract users into areas in the field of payments, retail lending, consumer loans.
Some other areas such as blockchain, POS technology and asset management are also areas that need to attract many users. For example, the asset management segment has FinHay running very aggressive campaigns in the market.
Blockchain is a new technology, so it also needs to invest a lot of money to develop. This segment may even require double or triple the amount of capital compared to other segments as this is the technology of the future.
How does the seed funding happen?
The seed funding will happen with 3 steps:
- First, investors and founders will meet and the founder will present ideas, business results and methods of using capital if they receive investment from investors.
- The second is that investors and founders will deal with each other on the amount of investment as well as the shares that the founder is willing to extract to attract investors. At the same time, deal with the divestment plan.
- Finally, the investor and the founder will close the above agreements and will go to the due diligence step from the investor side.