Seed Funding (Angels/Micro VC)
When someone is referring to “Seed Capital” they can be referring to raising startup money from Friends & Family, Angel Investors, Crowd-Funding, or Micro-VC firms.
Thank you Wikipedia for the above graph!
Seed funding is often given to startups prior to generating positive revenue as a means for them to make it to the point of being fully cashflow positive and thus self-sustaining. The seed money is intended for research & development, covering operating expenses, gaining traction, and ultimately attracting other seed investors. During this time, a startup is usually in full bootstrap mode and many founders forgo compensation.
Seed funding is considered a very high-risk investment because it is in the pre-revenue stage that a business is most likely to fail. How well an entrepreneur bootstraps, how quickly they gain traction, and how much money they raise can make or break a startup in the Seed stage.
When raising money, it’s advisable to take it on as another full-time job – simply attending a pitch night every few weeks will not get you any funding (unless you’re a unicorn crazy hot startup).