How To Raise Seed Round SaaS Startup Funding

Landing a seed round funding for your SaaS startup can be an uphill struggle—as a three-time co-founder and angel investor, I know how challenging the fundraising experience can be. Below is my advice on which sources to seek SaaS startup funding from, how to find the right investors, and tips on how to close the deal.

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2 Main Sources Of Seed Round SaaS Startup Funding

By the time your startup reaches the seed stage, you’ll likely have invested some of your own money and perhaps worked with an incubator or accelerator to help develop your business idea. For the seed round, angel investors and venture capital (VC) firms are the most common sources of SaaS funding.

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1. Angel Investors

Angel investors are individuals who make relatively small investments in early-stage businesses. You can usually secure seed round funding quickly from angel investors because they are the sole decision-makers; plus, because most angel investors have an entrepreneurial background, they can often give advice and practical knowledge based on their experience, and offer mentorship along the way.

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To find relevant angel investors for your startup, take a look at the following resources:

AngelList is one of the most well-known startup communities: Thousands of angel investors use this network to identify potential investment opportunities.

F6S is a growth community that allows founders to pitch to groups of angel investors.

Investor List is a crowdsourced list of over 1,000 investors based all around the world.

Gust is a startup network that includes hundreds of angel investor groups. It also provides tools to help entrepreneurs apply for funding and streamline their pitching process.

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2. Venture Capital Firms

SaaS venture capital firms represent multiple limited partner investors and can usually invest much larger amounts. As a result, venture capitalists generally look for products that have proof of product-market fit and some level of traction. Keep in mind that investment from a venture fund often comes with the expectation that your business will grow at an accelerated rate, so the VC’s equity stake in your business rapidly increases in value over a shorter period of time.

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If you’re seeking investment from VC funds, take a look at the following platforms and resources to find relevant SaaS capital firms:

PitchBook is a database of 35,000+ VC investors that subscribers can filter by factors like location and vertical.

Crunchbase provides an advanced search function that allows you to find information on over 14,000 VC firms, including listings of their portfolio companies.

CB Insights produces an annual list of the 100 biggest VC firms and partners.

Fundz lists 700 top VC firms organized by location.

Business Insider offers a list of the top 100 seed VC investors to subscribers.‍

The Midas List from Forbes ranks their top 100 venture capital investors each calendar year.

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Identifying The Right Investors For Your Startup

It’s important to do your research and reach out to the best possible investors for your business. A few best practices for identifying the right investors for your startup include:

Research the funding background of possible investors, and contact 20 or so that have a history of working with similar SaaS companies.
Understand the investment stage and philosophy of the individual or firm you’re reaching out to. For example, some funds focus exclusively on later stage technology companies and would not be appropriate to pitch for seed funding of your early-stage SaaS business.
If you’re pitching to a venture capital firm, reach out to the partner with the most direct experience in your startup’s vertical.
Network with other SaaS founders who’ve raised a seed round to understand their fundraising process, who they spoke with, and any tips or advice they may have to share.

By targeting your fundraising efforts on relevant investors and early-stage investment firms, rather than ‘spraying and praying,’ you’ll earn a much higher rate of response from investors.

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How To Catch The Attention Of The Right SaaS Investors

Once you’ve researched SaaS investors and identified those you want to approach, most founders will cold email investors until they make a connection. If you’re using this outreach method, ensure your emails are personalized and brief. However, be aware that cold emailing doesn’t have a high success rate.

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The most effective way to secure a meeting with a potential investor is through networking: If you can get an introduction to a potential investor from someone they respect, it’s much more likely that they will take you seriously. Socializing with investors also allows you to build a relationship with them and gives you an advantage when you’re ready to pitch.

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There are a few key startup characteristics that will impress potential seed round investors and increase your chance of securing SaaS startup funding:

Evidence of product traction, such as number of customers, usage metrics, monthly recurring revenue (MRR) and annual recurring revenue (ARR) figures, churn rate, gross margins, etc.

Proof of product-market fit, for example, feedback from customers on the pain point your product solves.

A clear revenue model, and early indication that your revenue model is or can be successful for your business model/industry.

Support from other angel investors or respected figures in the industry, which acts as positive social proof for potential investors.

A complete founding team that includes complimentary co-founders and employees with strong technology backgrounds and business expertise.

A game plan for how you plan to use the funds, including milestones as metrics to measure early success. Be prepared to field questions about your exit strategy (while you won’t necessarily include this in your pitch deck, it’s a question prospective investors often want to explore).

How Zeni Prepares Your Finances For The Next Investment Round

Zeni is a modern, full-service finance firm that handles startup bookkeeping, accounting, and CFO needs, freeing up founders to focus on growing their business. Zeni helps tech startups prepare for fundraising processes of all funding rounds — from seed to Series A, Series B, and beyond—by building financial statements, generating professional, realistic financial projections, and assisting with the creation of the finance slides for your pitch deck. Plus, Zeni can advise you on all the financial decisions that come with growing your business, from choosing the best bank accounts and credit cards for your startup to determining how to set up your accounting software.

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Once you start working with funders, the Zeni Dashboard makes it easy to share the high-level data that investors care about. The Investor Access option in the Dashboard allows funders to see real-time metrics, including your net burn, runway, and cash zero date, as well as your financial statements (P&L, balance sheet, and cash flow statement), without giving full admin permissions and keeping transaction-level detail confidential.

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