Seed Funding

Seed funding helps companies with a new product launch.

Seed funding is most often confused with startup capital, but they are two different things. It is provided to help a business develop an idea, create the first product, and market the product for the first time. Companies that typically qualify for seed funding are around a year old, and they have never created a product or service for commercial sale. The company is generally so young that the key management team has not yet been assembled, or if it is intact it was recently formed.

Seed funding is most commonly provided by angel or other private investors. If your business uses an investor to gain capital there are some things to keep in mind. As the owner, you will have to share your control of the business with the investors and you will also be required to share confidential business information with potential investors. Investors are also seeking to earn at least 30% on their money, so make sure your business can provide at least that much of a return before going after investors heavily.

Make sure that you also have a clear exit plan for the investment in place after a few years. In order to qualify for this sort of financing through an investor, it is important that the market for your product be at least $1 billion total. These are just a few things to keep in mind when looking for an investor for your business.


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