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A seed round, sometimes known as a friends and family round or seed funding, is a securities offering whereby one or more parties that have some connection to a new enterprise invest the funds necessary to start the business so that it has enough funds to sustain itself for a period of development until it reaches either a state where it is able to continue funding itself, or has created something in value so that it is worthy of future rounds of funding. Seed money refers to the money so invested.

Usage

Startup Financing Cycle

Seed money is typically used to pay for such preliminary operations as market research and product development. Investors are often the business founders themselves, using savings, mortgage money, or funds borrowed from family and friends. They may also be outside angel investors, venture capitalists or accredited investors who are acquainted in some way with the founders. Seed capital is not necessarily a large amount of money. Many people start up new business ventures with $10,000 or less.

Seed money can be distinguished from venture capital in that venture capital investments tend to involve significantly more money, an arm's length transaction, and much greater complexity in the contracts and corporate structure that accompany the investment. Seed funding involves a higher risk than normal venture capital funding since the investor does not see any existing project to evaluate for funding. Hence the investments made are usually lower (in the tens-thousands to hundred-thousands of dollars) as against normal venture capital investment (in the hundred-thousands to millions of dollars), for similar levels of stake in the company.

Seed money may also come from financial bootstrapping rather than an offering. Bootstrapping in this context means making use of the cash flow of an existing enterprise.

Investors make their decision whether to fund a project based on the perceived strength of the idea and the capabilities, skills and past history of the founders.

Sources of seed funding

Name Region Website Year Started Founders Funding Equity Location Office Space/ Incubation Focus Consulting Fees Fundraising Fees Pay To Pitch
North America
Ycombinator North America http://ycombinator.com/ 2005 Paul Graham, Robert Morris, Trevor Blackwell, Jessica Livingston $11k+3k*(number of founders) 2-10%, Average 6-7% Mountain View, CA, Boston, MA No Tech n/a n/a No
TechStars North America http://www.techstars.org/ 2007 David Cohen, Brad Feld, David Brown, Jared Polis $6k*(number of founders), max $18k 6% Boulder, CO, and Boston, MA Yes Tech n/a n/a No
Sproutbox North America http://www.sproutbox.com/ 2008 Brad Wisler, Mike Trotzke $200–250K 20-40% Bloomington, IN Yes Tech n/a n/a No
Bootup Labs North America http://bootuplabs.com/ 2009 Danny Robinson, Boris Mann $50k plus $100K credit line 5-10% Vancouver, Canada Yes Tech n/a n/a No
Launch Box North America http://www.launchboxdigital.com/ 2008 John McKinley, Mark McDowell, Julius Genachowski, Matthew Jacobson Up to $20k 6% Washington DC No Tech n/a n/a No
DreamIT Ventures North America http://www.dreamitventures.com/ 2008 David Bookspan, Michael Levinson, Steven D. Welch, Steve Barsh, Katrina Wester $5–$25,000 per person 4-8% Philadeplphia, PA Yes Tech n/a n/a No
AlphaLab North America http://www.alphalab.org/ 2008 Jim Jen $25k Unknown Pittsburgh, PA Yes Tech n/a n/a No
iVentures10 North America http://www.iventures10.com/ 2008 Unknown up to $25k Unknown Champaign, IL Unknown Tech n/a n/a No
fbFund North America http://fbfund.com/about/ 2009 Dave McClure, Andrew Braccia, Enrique Allen, Cat Lee, up to $100k Unknown Silicon Valley, CA Yes Tech n/a n/a No
Shotput Ventures North America http://www.shotputventures.com/ 2009 David Cummings, Sanjay Parekh, Allen Graber, Suleman Ali, Wayt King, Dave Wright, Mitch Free, Jeff Hilimire, Dave Williams $6k*(number of founders), max $18k 5-10% Atlanta, GA Yes Tech n/a n/a No
Capital Factory North America http://www.capitalfactory.com/ 2009 Joshua Baer, Sam Decker, Bryan Menell up to $20k 5% Austin, TX Yes Tech n/a n/a No
Next Start North America http://www.nextstart.org/ 2009 Unknown $5-$10k 5-10% Greenville, SC Yes All n/a n/a No
Goldstein Caldwell North America http://goldsteincaldwell.com 2008 Todd Goldstein, Dar Caldwell up to $20K 5%-10% Cleveland, OH Yes Tech, Medical, Consumer Products n/a n/a No
Europe
Seedcamp Europe http://www.seedcamp.com/ 2007 Saul Klein, Reshma Sohoni € 50,000 5-10% London, UK No Tech n/a n/a No
Find Invest Grow Europe http://www.findinvestgrow.com/ 2009 James King, James Herbert, Marco Geninazza Varies by deal (Typically £30,000 - £300,000) Up to 5%, Negotiable with Angel London, UK Yes Undergraduate and recent graduates n/a 4% No
Cmypitch Europe http://cmypitch.com/ 2008 Emmett Kilduff Varies by deal Angels retain equity London, UK N/A All n/a 5% Not any more
Angel's Den Europe http://www.angelsden.co.uk/ 2007 Bill Morrow, Lois Cook Varies by deal Angels retain equity London, UK N/A All £799 + VAT 5% Pay for pitching training
enVestors Europe http://www.envestors.co.uk/ Unknown Unknown Varies by deal Angels retain equity London, UK No All £1,000-2,000 5% Negotiable
Seedrocket Europe http://www.seedrocket.com/en 2008 Vicente Arias, Jesus Monleon € 20,000 5-10% Barcelona, Spain Yes Tech No No No
Open Fund Europe http://theopenfund.com/ 2009 Georgios Kasselakis, George Tziralis €20-30K 8% Athens, Greece Yes Tech n/a n/a No
Springboard Europe http://springboard.com/ 2009 Neil Davidson, Simon Galbraith, Amir Chaudhry None (Accommodation and living expenses) None Cambridge, UK Yes Software n/a n/a No
Austria Wirtschaftsservice Austria http://www.seedfinancing.at/ 1998 Republic of Austria € 1,000,000 None Vienna, Austria No Life Science, IT, Physical Sciences No No No
India
Seedfund India http://www.seedfund.in/ Unknown Pravin Gandhi, Bharati Jacob, Mahesh Murthy $500,000 Unknown Mumbai, India Unknown Tech n/a n/a No
iAccelerator India http://iaccelerator.org/ 2009 Freeman Murray, Kunal Upadhyay, Pranay Gupta, Aditi Gupta $10,000 5-15% Ahemedabad, India Yes Tech n/a n/a No
Morphesus Venture Partners India http://themorpheus.com/ Unkown Sameer Guglani, Nandini Hirianniah, Indus Khaitan $10,000 7%-12% Bangalore, India None Tech, Retail, Consumer n/a n/a No

See also

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