Seed Starting Issues

There is a fungal disease term called “damping off” disease and it affects seedlings. It actually is several diseases such as phytophera or thielivalopsis that kill the seedlings. I am a professional greenhouse grower and I don’t like using those paper pots because they sometimes contain lead ink. They also wick away moisture from the potting mixture causing them to dry out. If you go to your local garden center you can purchase a seed starting kit. It will contain all you need to get started. From the photo, I don’t see a lot of light for the plants. I would suggest a grow light fixture about 6 inches above the plants to give them a healthy start. Once they start to grow you can shorten up the light. You should also have good air circulation between plants to reduce disease transmission. Disinfect everything with a solution of 1 part liquid bleach to 9 parts of water to make a 10% disinfecting solution.
Watering when the soil is dry is important. Don’t mist plants. It causes the foliage to stay wet and fungal spores to take hold. Just gently but thoroughly water the seeds/seedlings. There are two other thoughts I have about your problem without seeing it in person. The first is you could have contaminated potting mix although that is very unlikely. The other could be that you are not watering the seedling thoroughly and the roots aren’t getting the water, only the top of the plant is getting water. Hope this helps and don’t give up gardening!