A seed round is the first round of funding for a startup company. It typically involves raising money from a small group of investors, such as friends, family, and angel investors. The money raised in a seed round is used to develop a proof-of-concept and create a working prototype of the product or service. This round is considered the earliest stage of funding and is used to get the startup off the ground, and establish the initial traction for the company. Seed rounds are generally smaller in terms of the amount of capital raised compared to later rounds, with the goal to secure enough funds to validate the business idea and achieve key milestones that would increase the company’s valuation and attract investors.
Seed rounds also usually involve less formal documentation, such as a term sheet or detailed financials, and often involve convertible debt or equity-based crowdfunding, allowing the startup to raise money without giving up too much control or equity in the company. The investors in this stage usually don’t have high expectations on the company’s return, but look to the potential of the startup’s idea.
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