What is Seed funding for start-ups and how it works

Start-ups companies require funding to support their operations, product development and office administrative expenses at seed-stage before generating cash flow from services or sale. Amount of fund always depends on the type of project and requirements.

The earliest round of funding for a newly start-up company is called seed funding or early state funding. This means it’s the earliest round of capital funded for a start-up company to get started and to grow.

Also read: How to register a private limited company in India

seed funding

Seed funding are generally funded by owners or their relatives, friends and family members. Because of high risk and instability, financial institutions or banks do not fund newly start-up companies.

In most of the cases, angel investors, venture capitalist and private equity funds takes interest in financing early stage companies. These investors are generally wealthy person wants to take risk on his investment. Some start-ups also gets their seed fund through crowdfunding.

In seed funding, investors make their decision based on the perceived strength of the idea and the capabilities, skills and history of the founders.

Here is a look at the top 7 well known seed-stage ventures;

500 Startups is a silicon valley based firm founded by Dave McClure. As per their website date, they have invested in more than 800 companies in more than 40 countries.

Andreessen Horowitz started by Marc Andreessen and Ben Horowitz. This Silicon Valley-based venture capital firm invests in entrepreneurs building companies at every stage – from seed to growth.

SVAngel is a San Francisco based Angel firm focuses on start-ups.

Helion Venture Partners, Founded in 2006, is an India focused venture fund. They have partnered with Yepme, Makemytrip, Redbus, TaxiForSure and PubMatic.

Accel Partners has global presence in London, Palo Alto, New York, China and India. They have investments in 99designs, flipkart, Dropbox, Lynda, Atlassian, bookmyshow, commonfloor, eventifier, freshdesk, Myntra, TaxiForSure and many others.

Blume Ventures provides seed funding in the range of $50K – $300K to early-stage tech-focused and tech-enabled ventures. They have funded start-ups like Carbon clean solutions, audio compass, bedbatmore and clink.

Sequoia capital India is known for its investment in Justdial, Practo, iYogi and bankbazaar.

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