Definition of seed capital
- He provided seed capital for the campaign.
: the grains or ripened ovules of plants used for sowing
: the fertilized ripened ovule of a flowering plant containing an embryo and capable normally of germination to produce a new plant
: a propagative animal structure:
: to bear or shed seed
: to sow seed : plant
: to plant seeds in : sow
: of or conforming to the series A, B, C, etc. rather than a, b, c, etc.
: being the seat of government
: chief in importance or influence
: a stock of accumulated goods especially at a specified time and in contrast to income received during a specified period
: accumulated goods devoted to the production of other goods
: accumulated possessions calculated to bring in income
Startup financing involves several stages of capital formation: seed capital, venture capital, mezzanine or bridge funding, and an initial public offering. The seed capital stage is the earliest stage of capital investment in a startup company. Seed capital is usually provided by the owners, family, friends, or angels (i.e. wealthy individuals who invest in companies on an individual basis). Some venture capital investors may invest seed capital in a startup, but typically on a smaller basis than their usual investments.
Seed capital is provided during the earliest stage of the company's formation, during the period of time when the company is involved a variety of early operations such as market research, product development, or prototype production. During this early stage of investment, the company typically does not have revenues, or at least revenues that lead the company to be breakeven.
Seed stage capital is invested on the basis of the entrepreneur's track record, skills, and business capabilities and the product's perceived strengths. Seed capital stage investment is the most risky, but because of the early stage of investment, it can have very substantial rewards. However, many early stage companies issue shares to follow-on investors, such as venture capitalists, and dilute the ownership of seed stage investors.
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