A seed round, sometimes known as a friends and family round or seed funding, is a securities offering whereby one or more parties that have some connection to a new enterprise invest the funds necessary to start the business so that it has enough funds to sustain itself for a period of development until it reaches either a state where it is able to continue funding itself, or has created something in value so that it is worthy of future rounds of funding. A securities offering (or funding round or investment round) is a discrete round of Investment, by which a business or other enterprise raises money to Seed money refers to the money so invested. Money is anything that is generally accepted as Payment for Goods and services and repayment of Debts.
Usage
Seed money is typically used to pay for such preliminary operations as market research and product development. Market research is the process of systematically gathering recording and analyzing data and information about Customers, Competitors and the Market Investors are often the business founders themselves, using savings, mortgage money, or funds borrowed from family and friends. See Investor AB for the Swedish investment company An investor is any party that makes an Investment. A mortgage is the pledging of a property to a Lender as a security for a Mortgage loan. They may also be outside angel investors, venture capitalists or accredited investors who are acquainted in some way with the founders. An angel investor or angel (known as a business angel or informal investor in Europe) is an affluent individual who provides capital for a business Venture capital (also known as VC or Venture) is a type of Private equity capital typically provided to immature high-potential growth companies Accredited investor is a term defined by various securities laws that delineates investors permitted to invest in certain types of higher risk Investments Limited partnerships Seed capital is not necessarily a large amount of money. Many people start up new business ventures with $10,000 or less.
Seed money can be distinguished from venture capital in that venture capital investment tends to involve significantly more money, an arm's length transaction, and much greater complexity in the contracts and corporate structure that accompany the investment. Venture capital (also known as VC or Venture) is a type of Private equity capital typically provided to immature high-potential growth companies Seed funding involves a higher risk than normal venture capital funding since the investor does not see any existing project to evaluate for funding. Risk is a Concept that denotes the precise probability of specific eventualities See Investor AB for the Swedish investment company An investor is any party that makes an Investment. Hence the investments made are usually lower (in the tens-thousands to hundred-thousands of dollars) as against normal venture capital investment (in the hundred-thousands to millions of dollars), for similar levels of stake in the company.
Seed money may also come from financial bootstrapping rather than an offering. Bootstrapping in this context means making use of the cash flow of an existing enterprise. Cash flow (also called net cash flow) is the balance of the amounts of Cash being received and paid by a business during a defined period of time sometimes tied
Investors make their decision whether to fund a project based on the perceived strength of the idea and the capabilities, skills and past history of the founders.
See also
- Private equity
- Investment
- Corporate finance
- Funding of open source software
- List of finance topics
- Angel investor
External links
Dapyx Software network: MP3 Explorer | Ebook Manager | Zenithic