How Active Seed Investors Can Make the World a Better Place
Seed investors hold a special place in the development of a company.
The money they provide allows an entrepreneur to take their vision and make it a reality, to take a company through its initial planning, prototyping, and proving until it can seek more substantial funds from a wide range of sources.
But the best seed investors do more than this.
Being More Invested
The role of the seed investor is riskier than that of later investors.
By providing those vital early funds, they’re taking a chance on an unproven company. You might expect that would lead to the sort of cut-throat attitude that often comes with high-risk high-reward investment.
But the better sort of seed investors, active seed investors, take an attitude that’s the polar opposite of that.
These are the people who become emotionally as well as financially invested in the projects they support.
Because they’re there from the start, they’re more engaged with the company. They see its progress from the very beginning.
They know what challenges it has overcome to get to where it is. Their stake in the company isn’t purely financial.
These are the sorts of investors who can give a company real stability.
They’re not going to pull their money out at the slightest wobble and go hunting for a plan
B. They’ve seen that the company can get past this stuff. They’ll stick it out and provide stability.
And because they’ve been there from the start, active seed investors are in a better position to offer their insight and experience.
Compare and Contrast
Compare that with a passive investor.
The passive investor is there for the returns, not the company or the service it provides. They’ve got their exit plan ready from the start, one eye always on the risks.
That creates a very shallow relationship to the investment.
The passive investor only cares about what the company’s share price and dividends look like right now, not the conditions of staff or the quality of the goods the company provides.
Long-term prospects are irrelevant next to short-term performance. They can end up fitting the cliché of the worst sort of capitalist.
An active seed investor, on the other hand, is more enmeshed in the company. They care about it for its own sake. They pay attention to what’s going on inside the business and what’s coming out as a result.
They want something more meaningful. They want this company to flourish.
The Benefits of the Active Seed Investor
An active seed investor can bring several benefits to a company.
Stability is an obvious one. If they’re willing to leave their investment in place for a while, to trust the company to grow its value, then they can provide financial certainty.
By not selling on their shares until a later date, they give the company longer to establish itself before becoming exposed to the vicissitudes of the market.
By being actively involved in the company, seed investors can share the benefits of their wisdom and experience.
Many have years of business experience, giving them long-term insight that some of the brightest young entrepreneurs haven’t had time to build. This can help to guide the company if management is willing to listen to these invested insiders.
And then there’s the cheerleading.
Having someone who believes in a company, who says so loudly and publicly, is good for morale among those working there.
It’s also good for the company’s public image.
That enthusiastic investor can help spread the word of what the company’s doing, bringing in business and investment.
Making the World a Better Place
Because of their approach, active seed investors help to make the world a better place.
They provide the vital finance innovators need to get their products off the ground.
This creates a world that’s more varied and full of possibilities, rich with new solutions to old problems.
But they don’t just throw fresh flavour into the swirling stew of business. By actively involving themselves in companies they invest in, they give them staying power. They strike a vital balance between novelty and continuity.
They provide support for people just starting in business, handing on their skills and experience to those who will follow.
Companies can benefit from any sort of investment. But active seed investment is the sort that can make the most significant difference, giving a financial jump start, a higher level of insight and support, and the stability to see a business through to fruition.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
