The seed phase is an early stage in the development of a start-up. During this phase, an initial validated business idea is developed into a market-ready product and a robust business model.
The main aim is to test key assumptions about the market, the target audience and the solution. At the same time, the start-up lays the groundwork for initial revenue, further growth and subsequent funding rounds.
Typical tasks during the seed phase include:
- further develop a prototype or a minimum viable product
- Attract your first paying customers
- Systematically analyse customer feedback
- validate the business and revenue model
- Improving the product, positioning and pricing
- Testing marketing and sales channels
- build a high-performing start-up team
- set the next growth targets and milestones
The seed phase usually follows the pre-seed phase:
| Pre-seed phase | Seed phase |
| Initial idea and problem validation | Further development of a solution that has already been finalised |
| Construction of an early prototype | Development of a marketable product |
| initial discussions with potential customers | first users, pilot projects or turnover |
| Searching for the problem-solution fit | Moving towards product-market fit |
| often a small start-up team | targeted team building |
At this stage, start-ups often require additional capital. So-called seed funding can be provided by the following investors, amongst others:
- Business Angels
- Venture capital investors
- Early-stage fund
- publicly owned companies
- strategic corporate investors
- Funding schemes
- Accelerators and incubators
The capital is often used for:
- Product Development
- technical infrastructure
- Staff expansion
- Marketing and Sales
- Market entry
- Patents and intellectual property rights
- first steps towards internationalisation
- Preparations for the next round of funding
Key objectives at the end of the seed phase may include:
- a fully functional and marketable product
- first paying customers
- Traction that makes sense
- a validated revenue model
- repeatable sales processes
- a clear stance
- reliable key figures
- a realistic plan for further growth
Investors often pay particular attention to the following during the seed phase:
- The quality and experience of the founders
- Relevance of the problem solved
- Size and growth of the target market
- Initial feedback from customers
- Differentiation from competitors
- Scalability of the business model
- Traction to date
- Capital requirements and financial runway
A common mistake is to scale up as quickly as possible before the product, target audience and sales model have been sufficiently validated. High expenditure on staff or marketing does not automatically lead to sustainable growth. It is crucial that the start-up gathers robust evidence of repeatable demand.
The seed phase does not last the same length for every start-up either. Its duration and objectives depend, amongst other things, on the business model, capital requirements, the sector and the development effort involved in the product.
innoWerft supports founders in the seed phase by helping them to validate business models and market assumptions, develop initial growth and funding strategies, analyse relevant key performance indicators, and establish contacts with potential customers, partners and investors.