What is this Financial Facility Known as Seed Funding and Can You Have Your Own Start-Up with its Help? Let’s Find Out.
In a bizarre news by itself, a start-up named PocketATM is making rounds in the news for raising 3.3 crore pre-seed funding. Why is this start-up able to make such big news? What’s bringing the attention of all focussed on them? The answer is “Pre-seed Funding”. As the term suggests, “pre” is a suffix used to talk about the time that comes before the actual act, meaning, there is a type of funding called “Seed Funding” also known as “initial investment” and “Pre-seed Fund” comes before that. These initial investments are made by different organizations, entrepreneurs, loans etc. and this new start-up called PocketATM has received financial support before getting Seed Fund, hence “Pre-seed Fund”.
Since PocketATM were able to raise 3.3 crores as pre-seed fund, that is, before initial investment, they gave themselves a rocket boost to kickstart their company. How is it so? When a start-up seeks for seed funding, the lowest possible amount to fund itself is $40,000, which is approximately Rs 35 lakhs and highest of $2.50 thousand that sums up to Rs 2 crores. If, in a basic initial investment the highest possible investment is Rs 2 crores, then this start-up raising 3.3 crores as pre-seed fund is indeed a note-worthy appraisal.
Now, what is Seed funding? Seed Funding is a financial facility for a start-up. There are different types of financial facilities to support start-ups like crowdfunding, accelerators, short-term or credit card-based loans, series funding (that are usually termed as Series A, B, C, D, E), angel investors, to name a few. All of these are termed as seed funding. So, if a large group of people come together to fund for a cause or a request put-up by an individual or an NGO, we call it crowdfunding. There are some mentor-based programmes that give guidance and support to a start-up, on a funding which is based on exchange for equity. Sometimes, a start-up chooses a financial facility that funds them through different stages depending on performance, revenue, key performance indicators (KPIs). These different stages of funding are termed as Series funding which are helpful in keeping a good flow of financial support. That is why they are termed in an alphabetical order as Series A, Series B, Series C, Series D and Series E. If the ideators of a start-up lay-out a well-structured business plan and request capitalists to invest in their start-up, such investors would be known as Angel Investors.
Who is PocketATM?
It is a fintech platform who plan mobilize cash-flow to consumers without the need to visit a traditional ATM. This platform will be made available in all provisional stores where a consumer can get liquid cash available with them instead of waiting in long queues in front of an ATM. Using PocketATM app, the consumer will scan a Quick Response (QR) code and avail desired amount of cash. The idea of making cash available to consumers has been brought up by Mihir Mehta and Sushil Kurri. They have planned to give 100% transaction fulfilment at almost zero charges to the customers providing an absolute convenience to the consumers. How were they able to achieve such a large investment in the early stages itself? The idea of a very smooth flowing and time saving cash-flow system – attracted investors from various sectors and departments. Some prominent names who have made investments in to this idea are Indian Express Commercial Ventures, the investment vehicle of Indian Express Group, Samir Modi of Modicare, Himanshu Nautiyal from Fractal Analytics, Nirav Mehta of Morgan Stanley Private Equity, Hemant Adarkar of Artha Center and Rajat Agarwal, partner at Vertices Partners.
Why many investors chipped in to this fintech start-up?
Let’s take a deep dive in to what Fintech means. We already know that fintech is a short form for financial technology. So, companies, consumers, small-scale and large-scale industries and every other individual or businesses can carry out transactions using technology from anywhere in the country and even for intentional purposes. For providing such services, where transactions and businesses can connect at one place, some companies emerge as innovative solutions known as Fintech Companies. These companies provide various software solutions, mobile applications and banking software solutions so that banks can provide ease of access to its customers. Fintech gives an individual an organisation to opt for digitally engineered services, manage finances and stay up-to-date on every financial activity. Now, whether these transactions are for online banking or making investments such as insurance or mutual funds, share market trading or for financial payments, fintech companies will provide seamless solutions for all of it.
What are the benefits a fintech can provide to consumers? The first and foremost benefit to all is “ease of access”. It also provides financial management through various means. Fintechs also provide economic relief, time savings, and reduced stress. It helps a consumer to keep a track of financial transactions, have better control of account management and improve financial planning. They even financial advisors online with whom you can chat in real time and get quick solutions. Because fintechs provide such flexibility, it has become an integral part of people’s day-to-day life. With so many benefits in hand for a consumer, PocketATM is bringing one of the most convenient methods of availing cash on the go. They are making provisional stores to become cash dispensing touchpoints which also includes delivery of cash at home.
Different types of Fintech Companies
Companies like PayPal and Venmo provide payment and remittance services. They facilitate digital payments, money transfers, and remittances. Fintechs who provide loans, credits, and financing through digital platforms are called Online Lenders or Peer-to-peer (P2P) Lending Platforms. As stated earlier, there are automated investment platforms who provide investment and financial management advices, also known as Robo-Advisors. We are also aware of various cryptocurrency fintechs like Binance, Coinbase, Bitcoin etc who provide a non-materialistic funds known as digital currencies. There are also some fintechs that help a consumer to keep a track record or create budget, make calculations through their apps. Lastly, we have even got a combination of insurance and technology termed as Insurtech which obviously helps you to manage your insurance portfolios.
Having such broad spectrum of fintechs in the market, there is always an opportunity for start-ups like PocketATM to emerge into the market with more ideas on bringing convenience and simplified processes in finance.
That brings up a question – CAN YOU VENTURE AND GO FOR A START UP?
Image credit: https://medium.com/@Ivan-Smith-308/how-to-write-seed-funding-business-plan-guide-template-71eead2ec121
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