Seed fund, barring a few early stage startups, is usually put in by the founders. The typical cycle starts with you having an idea that you believe can change the world. So, you get a team in place that you believe can help bring the idea to fruition. If you are lucky, the founding team that you bring in possess a set of complimentary skills that helps your venture sustain the talent crunch in the initial days. If you are even more lucky, then in addition to their time, your founding team also brings along some seed capital.
Now, if you and your founding team are experienced professionals, chances are your seed fund will be relatively larger, considering the time you had to replenish your savings. However, if you are in college or just graduated from it, savings is usually a term that your parents have been advocating for some years but never put into practice. So in that case, how do you fund your dreams? You end up doing what a lot of young entrepreneurs do – you borrow money from friends and family. Now, while some startup ventures require less upfront investment and running costs than others, but even a steady cash flow is advisable for when things do not go according to plan (and they rarely go in the startup world).
The second important consideration in a young startup’s life is reaching out to the right set of customers. This is especially cumbersome for businesses that target enterprises/other businesses, considering the high customer acquisition cost involved. Let’s consider a scenario – as a startup, you managed to attract high performing founders, pooled together a reasonably adequate seed fund, and started work on a prototype product/service. Since you do not have the time or the resources to undertake market research, you have no way of knowing that the prototype will have the constituents that your customer desire. What further complicates the situation is that at the prototyping stage, it is always a risk to reach out to enterprise customer, as a wrong step and you end up losing that account for good. So, how do you get the required inputs in time so as to make the corrective measures?
The third important consideration, which goes hand in hand with seed fund and product feedback, is the quality of your network. Here, network refers to the people you know. It goes without saying that for an entrepreneur, better the quality of the people network, chances are that more doors for success open up. If, as an entrepreneur, you are a naturally outgoing person, chances are that you have the connections required for the success of your venture. However, if you are an introvert or your work load simply does not allow you the chance to enhance your network, does it mean your chances of improving your success rate should also go down?
Before we go any further, let’s recap the 3 key considerations for an early stage startup –
(1) seed funding at the onset & ensuring adequate cash during the first year of the business
(2) relevant product/service feedback
(3) maintaining a good people network.
All these require time and energy of the founding team, which in itself is limited considering the multiple hats that each member plays in a startup. This is where startup competitions play a critical role.
Evolved from a forum that simply recognized & rewarded talent, startup competitions play multiple roles today.
First, they act as a platform where startups in an industry can not only interact with each other but also benchmark their ideas with the winners of the competition.
Consider the Berlin Startup Calling competition. In its 2nd edition, the competition brought together young entrepreneurs from across the globe to present their ideas on the technology industry, either as individuals or in a group. Then there is the Arena Singapore competition, where hardware/software startups from all of Asia compete over a course of a few months.
The second role that startup competitions play is to help early stage ventures gain valuable guidance from industry experts. This guidance can come by participating in the competition and getting inputs from the jury, which usually have industry thought leaders on the panel. For example, in case of Techcrunch’s Startup Battlefield competition, the final verdict on the winner is given by top venture capitalists, Techcrunch editors and entrepreneurs. On the other hand, for the Berlin Startup Calling competition, the judges panel contains Visual Meta’s (the company organizing the competition) founders, the Managing Director, and an angel investor.
The third role that startup competitions play is to help get visibility for the participating startups. Considering their tie-ups with media houses as well as several venture capitalists in attendance, startup competitions can help an early stage venture gain more traction over a span of few days than the venture would have been able to do on its own. Again, let’s look at the case of Techcrunch Startup Battlefield competition. Most of their previous competition winners, such as Dropbox, Yammer, Mint, and Tripit, among others have gone on to become successful companies. This occurred in part because of visibility that these companies received after wining the competition, not only from the media house but also from potential investors.
The final and perhaps the most important role that the startup competitions play is helping early stage ventures access seed fund. Now, this seed fund can be either direct (by winning prizes at the competition) or indirect (by gaining access to potential investors). If your idea/venture has what it takes to win a startup competition, you can expect to win cash prizes in most cases, thereby strengthening your seed fund.
With all these roles played, startup competitions can be a one stop destination for you as an early stage venture to replenish/create your seed fund, gain insights from industry leaders, and compete with other emerging startups.