Seed money, also known as seed funding or seed capital, is a form of securities offering in which an investor puts capital in a startup company in exchange for an equity stake or convertible note stake in the company. The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own (see cash flow), or until it is ready for further investments. Seed money options include friends and family funding, seed venture capital funds, angel funding, and crowdfunding.[1]
Traditionally, companies that have yet to meet listing requirements or qualify for bank loans, recognize VC as providers of financial support and value added services.[2] Seed money can be used to pay for preliminary operations such as market research and product development. Investors can be the founders themselves, using savings and loans. They can be family members and friends of the founders. Investors can also be outside angel investors, venture capitalists, accredited investors, equity crowdfunding investors, revenue-based financing lenders, or government programs.
Early-stage fundingedit
Seed capital can be distinguished from venture capital in that venture capital investments tend to come from institutional investors, involve significantly more money, are arm's length transactions, and involve much greater complexity in the contracts and corporate structure accompanying the investment. Seed funding is generally one of the first steps investors offer to get startups on their feet before they become fully operational.[3] Seed funding involves a higher risk than normal venture capital funding since the investor does not see any existing projects to evaluate for funding. Hence, the investments made are usually lower (in the tens of thousands to the hundreds of thousands of dollars range) as against normal venture capital investment (in the hundreds of thousands to the millions of dollars range), for similar levels of stake in the company. Seed funding can be raised online using equity crowdfunding platforms such as SeedInvest, Seedrs and Angels Den. Investors make their decision whether to fund a project based on the perceived strength of the idea and the capabilities, skills and history of the founders.
Government fundingedit
This is the most selective type of funding. Government funds may be targeted toward youth, with the age of the founder a determinant. Often, these programmes can be targeted towards adolescent self-employment during the summer vacation. Depending on the political system, municipal government may be in charge of small disbursements. The European Commission runs microfinance programmes (loans under €25 000) for self-employed people and businesses with fewer than 10 employees.[4] European seed capital is available, but typically is limited to a 50% share.[5] European SMEs can often benefit from the Eureka programme, which federates SMEs and research organisations, such as universities. Government programmes are often tied to political initiatives.[6][citation needed]
Other sourcesedit
Seed money may also come from product crowdfunding or from financial bootstrapping, rather than an equity offering.[7] Bootstrapping in this context means making use of the cash flow of an existing enterprise, such as in the case of Chitika and Cidewalk.[8]
Types of Seed fundingedit
Friends and family funding: This type of seed funding involves raising money from friends and family members.
Angel investing: As mentioned above, angel investors are wealthy individuals who provide seed funding in exchange for equity ownership.
Seed accelerators: These are programs that provide startups with seed funding, mentorship, and resources to help them grow their businesses.
Crowdfunding: This type of funding allows startups to raise money from a large number of people, typically through an online platform.
Incubators: These are organizations that provide startups with seed funding, office space, and resources to help them grow their businesses.
Government grants: Some government agencies provide seed funding for startups working on specific projects or in specific industries.
Corporate ventures: Some big companies set up venture arms to provide seed funding to startups in their industry or complementary field.
Micro-Venture Capital: A type of venture capital that provides seed funding to new startups and early-stage companies with a small amount of money.
^Hollow, Matthew (20 April 2013). "Crowdfunding and Civic Society in Europe: A Profitable Partnership?". Open Citizenship. Open Citizenship Journal. Retrieved April 29, 2013.
^Narayansamy, Cheedradevi. "VENTURE CAPITAL PRE-INVESTMENT DECISION MAKING PROCESS: AN EXPLORATORY STUDY IN MALAYSIA". GLOBAL JOURNAL OF BUSINESS RESEARCH. GLOBAL JOURNAL OF BUSINESS RESEARCH. Retrieved 20 Feb 2018.[permanent dead link]
^Kronenberger, Craig (2021-03-02). "Startup Studio Basics: 19 Startup Studio Terms You Should Know Today". Medium. Retrieved 2021-08-30.
^"EU-backed small business loans – European Commission". Retrieved 20 March 2015.
^. Archived from the original on 2 April 2015. Retrieved 20 March 2015.
^Grant, Rebecca (24 June 2013). "Crowdfunding vs. seed funding: All money is not created equal". VentureBeat.
^Micucci, Emily. "Chitika to spin off mobile segment". www.wbjournal.com. Retrieved 19 March 2015.
January 01, 1970
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For the 2015 documentary film see Seed Money The Chuck Holmes Story This article has multiple issues Please help improve it or discuss these issues on the talk page Learn how and when to remove these template messages This article possibly contains original research Please improve it by verifying the claims made and adding inline citations Statements consisting only of original research should be removed July 2012 Learn how and when to remove this message This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Seed money news newspapers books scholar JSTOR September 2014 Learn how and when to remove this message The neutrality of this article is disputed Relevant discussion may be found on the talk page Please do not remove this message until conditions to do so are met March 2015 Learn how and when to remove this message Learn how and when to remove this message Seed money also known as seed fundingorseed capital is a form of securities offering in which an investor puts capital in a startup company in exchange for an equity stake or convertible note stake in the company The term seed suggests that this is a very early investment meant to support the business until it can generate cash of its own see cash flow or until it is ready for further investments Seed money options include friends and family funding seed venture capital funds angel funding and crowdfunding 1 Contents 1 Usage 2 Early stage funding 3 Government funding 4 Other sources 4 1 Types of Seed funding 5 See also 6 ReferencesUsage edit nbsp Startup financing stages Traditionally companies that have yet to meet listing requirements or qualify for bank loans recognize VC as providers of financial support and value added services 2 Seed money can be used to pay for preliminary operations such as market research and product development Investors can be the founders themselves using savings and loans They can be family members and friends of the founders Investors can also be outside angel investors venture capitalists accredited investors equity crowdfunding investors revenue based financing lenders or government programs Early stage funding editSeed capital can be distinguished from venture capital in that venture capital investments tend to come from institutional investors involve significantly more money are arm s length transactions and involve much greater complexity in the contracts and corporate structure accompanying the investment Seed funding is generally one of the first steps investors offer to get startups on their feet before they become fully operational 3 Seed funding involves a higher risk than normal venture capital funding since the investor does not see any existing projects to evaluate for funding Hence the investments made are usually lower in the tens of thousands to the hundreds of thousands of dollars range as against normal venture capital investment in the hundreds of thousands to the millions of dollars range for similar levels of stake in the company Seed funding can be raised online using equity crowdfunding platforms such as SeedInvest Seedrs and Angels Den Investors make their decision whether to fund a project based on the perceived strength of the idea and the capabilities skills and history of the founders Government funding editThis is the most selective type of funding Government funds may be targeted toward youth with the age of the founder a determinant Often these programmes can be targeted towards adolescent self employment during the summer vacation Depending on the political system municipal government may be in charge of small disbursements The European Commission runs microfinance programmes loans under 25 000 for self employed people and businesses with fewer than 10 employees 4 European seed capital is available but typically is limited to a 50 share 5 European SMEs can often benefit from the Eureka programme which federates SMEs and research organisations such as universities Government programmes are often tied to political initiatives 6 citation needed Other sources editSeed money may also come from product crowdfunding or from financial bootstrapping rather than an equity offering 7 Bootstrapping in this context means making use of the cash flow of an existing enterprise such as in the case of Chitika and Cidewalk 8 Types of Seed funding edit Friends and family funding This type of seed funding involves raising money from friends and family members Angel investing As mentioned above angel investors are wealthy individuals who provide seed funding in exchange for equity ownership Seed accelerators These are programs that provide startups with seed funding mentorship and resources to help them grow their businesses Crowdfunding This type of funding allows startups to raise money from a large number of people typically through an online platform Incubators These are organizations that provide startups with seed funding office space and resources to help them grow their businesses Government grants Some government agencies provide seed funding for startups working on specific projects or in specific industries Corporate ventures Some big companies set up venture arms to provide seed funding to startups in their industry or complementary field Micro Venture Capital A type of venture capital that provides seed funding to new startups and early stage companies with a small amount of money See also editAngel investor Digital currency Crowdsourcing Private equity Revenue based financing Series A round Venture capitalReferences edit Hollow Matthew 20 April 2013 Crowdfunding and Civic Society in Europe A Profitable Partnership Open Citizenship Open Citizenship Journal Retrieved April 29 2013 Narayansamy Cheedradevi VENTURE CAPITAL PRE INVESTMENT DECISION MAKING PROCESS AN EXPLORATORY STUDY IN MALAYSIA GLOBAL JOURNAL OF BUSINESS RESEARCH GLOBAL JOURNAL OF BUSINESS RESEARCH Retrieved 20 Feb 2018 permanent dead link Kronenberger Craig 2021 03 02 Startup Studio Basics 19 Startup Studio Terms You Should Know Today Medium Retrieved 2021 08 30 EU backed small business loans European Commission Retrieved 20 March 2015 Quick guide to direct funding Archived from the original on 2 April 2015 Retrieved 20 March 2015 dead link Greentrustwind co uk website Archived 2013 10 06 at the Wayback Machine Grant Rebecca 24 June 2013 Crowdfunding vs seed funding All money is not created equal VentureBeat Micucci Emily Chitika to spin off mobile segment www wbjournal com Retrieved 19 March 2015 Retrieved from https en wikipedia org w index php title Seed money amp oldid 1220135813, wikipedia, wiki, book, books, library,
