Three key considerations:
- “Seed stage” is defined as the critical period when the founders of a business need funding to do solution and business-model development to prove that their new product or service works, before trying to sell it to customers.
- Most investment vehicles are not available at seed stage, so often seed finance comes from family, friends and business connections.
- There are new entrants and approaches to seed stage funding that can supplement this, including for example angel investment or equity crowdfunding.
What is seed finance?
The initial capital used to start a business is seed finance – sometimes called seed funding or seed capital. Seed finance often comes from the company founders’ personal assets or personal borrowings, or from friends and family.
The amount of money is usually relatively small, because the business is still very much in its nascent stages – certainly pre-profit, usually pre-revenue and pre-proof of concept.
If you are interested in seed finance, there are increasing numbers of organisations that offer this, and many resources available for more information.
Some of the options available at this stage may include:
- In some instances, a start up loan may be available
- Seed-stage angel finance (not all angels offer this –the UK Business Angels Association can offer more information)
- Equity crowdfunding
- Micro-VCs (venture capital firms) are firms that invest institutional money (meaning other people’s money) in projects that are at the seed stage
- Incubator or accelerator schemes may be available in your area (link to regional support page)
- Bank loans, or loans via peer-to-peer lenders secured against personal assets can also be used, but this does carry personal risk.
- Finally, some more mature companies or corporate venturers offer seed funding to promising startups working on innovative technologies that might be good acquisition candidates later.
We recommend that if you are looking for seed finance, you always seek advice.
To explore the other finance options for your business, go back to the Finance Journey tool.