What is Seed Funding?

Seed funding is the initial capital raised by a startup to fund early operations, product development, or market validation before generating significant revenue.

This stage of funding typically comes from angel investors, friends and family, or early-stage venture capital firms and is used to build a MVP, hire key team members, and test product-market fit.

Startups at the seed stage are still considered high-risk, so seed investors usually receive equity financing or convertible notes in exchange for their early backing.

Example

"After validating their MVP, the founders raised $500,000 in seed funding from two angel investors and a micro VC."

How is Seed Funding used in business?

In business, seed funding provides the financial runway for new startups to move from idea to execution. It helps cover essential early costs like software development, team salaries, legal setup, and go-to-market strategies.

Unlike later-stage funding, seed rounds are more flexible and often based on vision and founder potential rather than revenue or traction.

Many companies raise a pre-seed round first, followed by a seed round, then move toward Series A funding once they prove traction.

Pro Tip

Use seed capital wisely. Investors at this stage often invest in you as much as the product, so strong communication and early progress can lead to long-term support.