How long does it take to get seed funding? And, how do we break down the barriers founders face?

Securing funding is one of the most important stages of growing your start-up from an idea to a thriving business. But it’s a challenging process with lots of hurdles, and it often takes more time than founders anticipate.

Investors want to be sure that they’re investing wisely. That requires a lot of effort on your part to provide the right information in the right format at the right time. It can be a fine balancing act.

For many entrepreneurs, the early days of securing investment can feel like a fulltime job. It’s stressful, as you’re juggling this with the needs of running a business at the same time. On top of this, you’re probably wearing lots of different hats as you don’t yet have the funds to employ staff to help you.

This guide will walk your through your options, and explain how long it normally takes and barriers founders face.

Different fundraising routes

There are many different routes and stages to raising funds, and it’s a world that’s riddled with new terminology which can be overwhelming. Each stage comes with its own set of complications that can slow down the process too.

Seed funding through angels

In pre-seed funding, founders invest their own money or turn to family and friends to get their idea off the ground.

This is followed by the seed stage, where founders look to attract angel investors. These are people who allocate funding to start-ups that are still in their early stage.

Angels will want to see evidence that your business has promise. But most angels will also be prepared to provide funding to develop your idea, test the market and hire staff.

Venture capital

After seed funding comes three rounds known as series A, B and C. These are often funded by venture capitalists (VCs). 

These rounds involve larger sums of money, so VCs want to see a proven business model, a good customer base and evidence that you’re generating profit. In particular, they will be looking to invest in start-ups with huge potential for scaling their business. They usually expect to get a return on their investment within three to five years.

Syndicates

Syndicates allow you to get funds from a range of investors. This has the benefit of giving you access to a larger number of backers without having to deal with them all individually. 

These types of investments tend to be higher risk with a higher reward. It can be trickier to  align diaries and get everyone to fit you in, which can prolong the process.

What is the typical timescale for raising funds?

Often, there’s an assumption that you can raise seed funds within three months. The reality is that it usually takes around six to 12 months – and it can take longer. 

It’s especially hard, slow work raising investment for an initial seed round, because you have to convince investors without a fully proven concept or lots of traction.

In the following rounds, you’ll have built momentum and it’s likely that existing investors will reinvest, making the process faster.

Businesses list on Ethical Equity with a start and end date – usually within a 30 or 60-day time period. This shorter burst helps to create FOMO (fear of missing out) and encourages investors to engage, but listings can take longer to get to the finishing line. We work closely with our start-ups to connect them with like-minded investors and keep their listings fresh.

The barrier of getting access to investors

Perhaps the hardest part of raising funds is getting access to investors. Finding the right investors can take months; setting up a time to meet can take just as long.

We know that start-up investment is drowning in inequality. A report by Extend Ventures found that nearly 70% of all capital raised across the seed, early and late VC funding stages went to all-male teams. Just under 3% went to all-female teams.

But it’s even more problematic than that. The same report found that 43% of VC seed investment went to founding teams with at least one member from an elite educational background. 

Founders from these backgrounds are more likely to have a developed network of known contacts to tap into. Yes, they still need to put a convincing pitch deck together. But the initial process of finding, contacting and meeting potential investors is much quicker and straightforward than for founders from a minority background.

On top of this, the entry point to funders is often through one decision maker. And guess what? This is usually a white man in his 50s who makes the call on whether the start-up is right for their members. In a survey of over 500 investors by CoFounder, 79% of angel investors were White British and a further 15% were White from other ethnicities.

When it comes to investment syndicates, the problem is only multiplied because you’re going through several gatekeepers, all cut from the same cloth.

Breaking down the barriers to speed up the process

The main problems all seem to boil down to the same thing – the need to create a level playing field so that all founders can access like-minded investors. Without this, too many start-ups will stall at the first fundraising hurdle and the same old cycle continues.

So we know what problems we’re facing, but how exactly do we solve them? These are the top three things that we believe need to be embraced to bring about change.

1. Increase diversity on funding teams

We know that investors are more likely to invest in founders who are ‘like’ them. We also know that senior leadership teams and funders are predominantly white, university-educated men. It’s easy to see why white male founders raise more funds.

So the solution has to start with a more diverse group of investors. Diversity among funders will give start-up founders from minority backgrounds a fairer chance of raising the money they need to grow their businesses. 

Lucy Hall, founder of fashion rental app Loanhood, agrees.

“Having more female founders as investors will help, but that will take some time. We need successful female founders who have exited to join the ranks of VCs and angels but we need to invest in them first.

“From my experience, when you’re pitching a fashion business aimed at Gen Z, it can often be hard for investors to grasp the idea if they’re over 40 and male,” she said.

And it works both ways. It’s only when people can see leaders and role models they can relate to that they will be inspired to start a business, seek funding to help it grow and become the investors of the future.

2. Introduce education and training

We all have ingrained views and beliefs about others, based on our background and upbringing. When it comes to funding, this concept (known as unconscious bias) can be a major stumbling block.

The first step in unpicking unconscious bias is recognition among angels, VCs and senior leaders – i.e. educated white men. Then it's about education; holding unconscious bias workshops and internal training to break down these inbuilt misconceptions.

This is a barrier that Keri Andriana, founder of vegan handbag brand Amschela, has come up against.

“Traditionally funding has been steeped in male candour with females getting little or no recognition for business acumen. This misconception has naturally overflowed into the decision making when it comes to applications for funding from female founders,” says Keri.

“I think the bias surrounding the capabilities of females is what needs to change in the ecosystem. Decision makers need to look at the business itself with the gender of the business owner removed from the process to make it more of an equal playing field.”

3. Disrupt the traditional funding model

A broken system needs a new approach – one that’s open, transparent and honest. We need to create a fair process, where all founders have access to funders who are the best match for their business.

Using a platform like Ethical Equity helps to break down barriers in the introduction system for fundraising. It means that funders from minority backgrounds can make valuable connections and grow their network.

Creating a new funding framework

The time it takes to raise seed funding is undeniably dependent on the strength of your contacts. Too many start-ups struggle to gain momentum in the early stages and give up.

Unless we change the narrative, nothing will change. This means creating a funding framework where founders from diverse backgrounds are confident in their ability to raise funds on the same terms as others.

This post is for awareness only and is not for financial promotion. If you’ve got a financial question please seek independent advice.