Seed Capital

Seed capital is money used as the initial investment for a new product or service launch.

Seed capital enables businesses to launch a new product or service without depending fully on a business loan. The funds for this form of financing are typically provided by private investors who are looking for a high return on their investment of at least 30 percent. The investors look to invest in an industry with a market of at least $1 billion, and they also want an industry with few competitors for your business.  

Businesses that typically obtain seed capital are young companies around one year of age that have not produced a product or service for commercial sale yet. The companies are so new, so it can be difficult to obtain a regular commercial loan that is sufficient for covering all of the related start-up expenses. Regular lending institutions also don’t like taking large risks in companies, but an investor will take a risk in the hope of a high return on the investment.

There are some things about seed capital that are extremely important for a business owner to understand. An investor often will want partial control of the business, so you have to be willing to give up a portion of your business if you want financing from an investor. Another thing to keep in mind when seeking investors is that you will have to share confidential information about your business with them.


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