The Basics of Seed Funding

Seed funding can be used for a wide variety of things and is ultimately designed for a company to do with as it sees fit. Some investors will stipulate what they wish for the money to go towards, whereas others will not.

Seed funding is generally used to help project the company into the next round of funding or to finance it’s first steps including the likes of product development, market research and much more so that it is in a position where it can generate its own income. With the right dedication, business strategy and perseverance the company should hopefully start to grow from this initial investment.

Almost anyone who has a bit of money can invest via seed funding from family and friends to founders and more. Many companies tend to prefer to have investors who are known and are close to them, however, outside investors, such as venture capital and angel investment can also be seed funders.

Angel investors are those who tend to invest in start-ups and are classed as a riskier venture as there is no previous track record of the business so far. In exchange for their investment, they tend to expect an equity stake in the company. Venture capital financing is a private equity capital that can be provided at various stages or funding rounds.

Many start-up businesses tend to get their seed funding through other projects too such as via crowd funding systems and Kickstarter among others.

Seed funding is ultimately just a stage of funding rather than a method or way of funding. They will usually invest in a part of the company so they will usually benefit if they decide to sell their shares to another investor or from any of the stock equity should the business decide to go public. If a company has crowdfunded, the business could have various offerings for their investors including bonuses for their investments or even early access to certain services of products depending on what the business offers.