Seed Funding Ideas
Here is a fresh take on how to fund your Start Up without a bank loan or investors.
I have always been fascinated by entrepreneurship. And with rising inflation and instability in the global economy, I think it’s prudent for everyone on the planet to have more than one source of income.
I have been exploring alterntive economies for years now. Here is one way to generate funds that I have personally witnessed and I have seen how well it works.
Start a Seed Bank
This is like a tanda with benefits.
If you read my previous article about tandas, you’ll know that a tanda is a way to make a circular economy. In this method of generating wealth, each participant contibutes into a pot each month, and the participants take turns taking the pot for themselves. The tanda exists until everyone has had a turn to recieve the pot.
In the Seed Bank version of a tanda, each participant contirbutes equitably, and each participant takes turns recieving the pot of money, and in addition, each participant benefits from some free labour and the professional expertise of other group members. The participants can be a group of friends or like minded people interested in starting a business. It’s a grassroots community effort, not a government regulated program.
How do you start a Seed Bank?
Talk to people. Gather small group of likeminded people, in this case people who want to start up a new micro business or scale a hobby into a business.
All participants form an agreement. They each agree to pitch in a set amount of money each month, on a designated day of the month. The total amount collected in a given month is given to one participant in the group, decided by a lottery system or discussion ahead of time. Each participant gets a turn to receive.
The Secret Sauce:
In addition to the money, the recipient gets free advice and a predetermined number of free hours of labour, to help the recipient save money and benefit from the expertise of others when lanuching their business.
This is how the seed funding can really help a new business bloom. This is a big advantage over bank lonas or investors who only want a good return on their investment.
3.All participants partcipate until the end of the agreement.
As in a tanda, the agreement to participate in the Seed Bank is not finished until each participant has had their turn to recieve the ‘pot’ and group assistance to launch their business.
Three Examples of Successful Seed Banks That I have Personally Witnessed
Rebuilding After Economic Collapse
I first witnessed this method of community assistance in Thailand, just after the economic collapse in the early 2000’s.
One day, I saw a young Thai man that was part of a group of aspiring Thai teachers of English practising a speech in front of the mirror at the guest house where I lived.
He was wearing his best clothes and seemed very nervous. He explained that he was about to meet with a group of people and pitch his business idea to them, in the hopes of gaining entry to their seed bank group. This was his way out of impending financial ruin, and a way to help his family eat, since many in his family had lost their jobs overnight. A lot was riding on his success in this venture.
The seed bank group was a group of people that he knew. It wasn’t a government grant program or NGO. It was a trust network and operated on honour.
They very selective about who it accepted, looking not only at the business idea and scrutinizing the plan to see how feasible it was to become profitable, but also at the skill set of the person making the pitch. They were looking for a well rounded range of skillsets, so all the participants could help each other start each of their businesses in turn, and benefit from each other’s free labour. All the people in the group who had already been accepted would decide about the rest of the people they wanted to join. It was not hierarchical, but equitable. One veto from anyone, and a potential candidate would not be allowed to join.
My friend was accepted, and so, he found a way to get back on his feet financially and help feed his family during a time of great financial crisis in his country. His group had 12 people in it, and the order of helping each participant was decided at the time of joining, based on the readiness of each business plan and who is in the best position to succeed the soonest and with the least amount of risk and effort.
Start Ups After University
I also saw this idea in action years ago in Canada. This was how a now famous pizza chain I used to work at on Robson Street, Vancouver, got started.
A group of university friends teamed up after graduation to make a collective. They started a seed bank for themselves, as I described above, to help each of them launch a business venture.
They were a collective of artists and creative thinkers. None of them had enough business experience or credit ratings to get the funding needed from traditional sources to launch and suceed in their businesses.
They each agreed to contribute a hefty amount of money each month, as well as give free labour to each other in turn, for the first three months of business, in order to minimze the expenses associated with launching a new business. Each agreed to own a certain amount of equity in each other’s businesses.
The businesses they started included different artsy cafes and restaurants, and a very cool and trendy interior design and household item shop. Some of the participants designed and produced the items to sell in the shop. All of them participated in the painting, renovations, and staffing of the shop and cafes and restaurants. They all helped the pizza restaurant taste test new pizzas and develop new and innovative pizza topping combinations. (Some proved extremely popular, such as the ham and peach and toasted almond pizza).
They had met many times in advance to iron out the business ideas and details, in order to give each business the best chance to succeed. The artists gave their artistic talents to paining the interiors and designing murals and graphic designs for free. The business minded amongst them helped with the financial planning. One member had studied law and he helped with legal matters.
Artistic Ventures
I also know another group of Canadians who were artists and dancers and musicians form a seed bank /working group to help fund and operate their artistic ventures including a dance festival musical events, and a yoga/pilates studio.
They had meetings and decided in advance what would happen in different situations that would be fair to all. For example, they worked out what would be fair if someone wanted to exit the group before everyone had had a turn, what would happen if someone defaulted on payment or couldn’t help with the labour promised to another participant. They set up contingency plans and what would count in lieu of money (e.g. working extra hours in a shop for free) to ‘pay for’ their portion of the monthly agreement), and even what would happen if someone became incapacitated or died. Tbey decided to ask all participants to have a secondary person to guarantee a person’s monthly contribution. Despite being based on trust, they had an agreement. It might not have been as formal as a contract, but the intent was just as morally binding.
Benefits of This Type of Funding System
No one had to pay back money, or pay interest on the funds they recieved.
The amounts to be paid each month were more agreeable than a bank loan repayment plan.
Having many people help review the business concepts and planning helped all the businesses succeed, providing a more well rounded skillset to draw upon
The equity sharing meant that they all benefitted from every successful venture.
The free labour helped give the new business some financial relief in the period of time when they were first trying to generate sales and gain customers.
This arrangement provides emotional support as well as financial and business operation support, reducing stress.
It eliminates the pressure of trying to please (and pay) external funders and investors.
It is a great way to start over if you have suffered financial hardship and can’t get a loan or funds using traditional methods
I believe that community based collaborative economies are the way to go!