Seed funding is the investment round following the pre-seed stage, raised by a startup to support product development, initial team growth, and market entry. This funding enables startups to achieve early milestones and validate their business model before advancing to larger funding rounds, such as Series A.
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Why is seed funding essential for startups?
Seed funding provides the financial resources that startups need to transform an idea into a viable product or service. It helps entrepreneurs develop a minimum viable product (MVP) and begin testing it with early customers.
Who typically provides seed funding?
Seed funding is commonly provided by angel investors, friends and family, and sometimes early-stage venture capital firms. Many startups also secure seed capital through accelerators and incubators.
How does seed funding differ from Series A funding?
Seed funding is usually smaller and occurs earlier than Series A funding. While seed funding supports initial development and proof of concept, Series A funding typically focuses on scaling the business and expanding its market reach.
What types of investors are involved in seed funding rounds?
Seed rounds often involve individual investors, known as angel investors, who may have experience in the startup’s industry. In some cases, venture capital firms specializing in early-stage investments may participate as well.
Is seed funding typically exchanged for equity?
Yes, seed funding is generally exchanged for equity or convertible notes, granting investors a stake in the startup and potential future returns if the company succeeds.
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