Definition of Seed capital:
The term seed capital refers to the type of financing used in the formation of a startup. Funding is provided by private investors—usually in exchange for an equity stake in the company or for a share in the profits of a product. Much of the seed capital a company raises may come from sources close to its founders including family, friends, and other acquaintances. Obtaining seed capital is the first of four funding stages required for a startup to become an established business.
Comparatively small amount of capital contributed in the very beginning by a firms founder(s). It is rarely provided by lenders or institutional investors because startup is the riskiest stage in a firms life cycle with the highest chance of failure. Also called front end money, front money, or startup capital.
A company that is first starting out may have limited access to funding and other sources. Banks and other investors may be reluctant to invest because it has no history or established track record, or any measure of success. Many startup executives often turn to people they know for initial investments—family and friends. This financing is referred to as seed capital.
How to use Seed capital in a sentence?
- The initial investors providing seed capital to our organization have experienced a significantly greater return on investment versus those providing capital in later years.
- This funding generally covers only the costs of creating a proposal.
- Seed capital is the money raised to begin developing an idea for a business or a new product.
- After securing seed financing, startups may approach venture capitalists to obtain additional financing.
- The seed capital was generated and the project was being executed at this point, we worked tirelessly to complete the project.
- Some seed capital may come from angel investors—professional investors who have a high-net-worth.
- The inventor had a great idea but no money. He went to a bank to request a loan for seed capital to start his business.
Meaning of Seed capital & Seed capital Definition