The main challenges at Seed companies, and how to conquer them

by Patrick Thorp - March 23, 2021

The Seed market is incredibly exciting. There are some great businesses that fail because they are too far ahead of the market and trying to fix a problem that doesn’t exist and the converse is also true: those that are just solving an existing problem better than their competitors but it’s not exactly revolutionary. Revolutionary businesses that are fixing a problem better than their competitors (if there are any) are my favourite and those businesses have stared these 4 challenges in the face and overcame them.

Challenge 1: Funding 

Early-stage companies need cash to scale. At the Seed stage, you’ll need a lead investor, because you will be slightly larger (there are exceptions of course) than an Angel round. To ensure VCs take you seriously there are some ways to stack the deck in your favour. MRR needs to be around £15k to £50k because this is what your peer group will be doing. Your pitch deck needs to be on point which I talk about in this article, and as a Founder you need to be happy giving away 10-20% of your company for a raise of £500k to £2m on the very top end. Having a pitch deck, a great vision, and metrics that demonstrate momentum is incredibly important to get that all-important lead investors cheque.

Challenge 2: Proposition 

What is the problem you are solving? How much experience do you have of that problem? These are easy questions to ask, not necessarily easy to answer. Leading with your Value Prop is a critical step for your company. Being able to communicate to the market why you are doing what you are doing, how you do it, and finally what is it that you do (thanks Simon Sinek) is a structure you should follow. Even if this problem exists, what is the total addressable market? How many people suffer from this issue? And therefore what is the route to revenue? These final points are for VC conversations but as a Founder having answers to these questions is critical in your messaging both internally and externally.

Challenge 3: People 

Jim Collins talks about having not only the right bus but the right people on the bus sat in the right seats to ensure a business progresses. At the Seed stage, an experienced management team is incredibly important, and by experience, I don’t mean 20+ years commercial experience or a thrice Exited Founder (that is helpful though!) – more experience of the problem you are solving, and then the people on board who are bought into the mission and can move the needle. For example, you need those who can set the foundations to take you from that £0 MRR to the £50k MRR and not optimisers who can take you from £1m ARR to £3m ARR. You need passionate generalists at this stage not experienced specialists.

Challenge 4: Process 

I have put these challenges in order of importance. Process and a repeatable process are only figured out once you have tested your hypothesis and then iterated on it. To create awareness of the problem you solve and how you fix it, you need to test many different growth channels, and those channels you feel your audience hang out in. The process design you want to consider is how to convert a stranger into a customer in the quickest and most efficient way possible, focussing on a great CX and if you are selling something complex, holding the respective hands through the process.

There are many different sub-challenges within these 4 major ones, but taking a view of your business through these lenses will help you identify and define the challenge you are faced with which is the hard bit, the solution is the easy bit.



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