Early stage investment in a start-up, prior to more formal funding rounds. Seed capital is usually provided by the founders themselves, their friends and family and other angel investors. It generally represents the first external injection of cash into a start-up.
Seed capital pays for a range of core activities including product development, customer testing and PR as well as providing salaries for early employees (although these are few and far between, and often on a temp contract basis). Because the amount available from seed funding is relatively low, it usually only provides a runway of a few months for start-ups to run their businesses for.
Seed funding has also been known to fund a series of ‘essential’ business trips around the world where founders try to sell their start-up idea to Venture Capital Firms and enterprise partners, enjoying nice hotels while they are at it.
Disagree or want to add something? What does Seed Capital mean to you?