Thursday, 11 February 2016

WHAT IS SEED CAPITAL?

Seed capital is the money used to start a business. It pays for market research, product research, development, a business plan and other early operating expenses until the business earns revenue. It’s usually a small amount because risk is high and the business is still just an idea.

Seed capital usually comes from a founder or founding group. It can also come from friends, family or other supporters.

Venture capitalists, banks and others may invest additional funds once the new company shows promise. Eventually, it can be sold to provide a return on the seed capital. Other times, it may issue an initial public offering to raise more capital.
Seed capital is a high-risk, high-reward investment. It can provide big rewards if the company succeeds and grows, even if the original shares are diluted by additional investors.

Outside investors who provide seed capital usually receive a stake in the company. But if the company doesn't work out, seed capitalists lose their investment and must look for the next opportunity.

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