Seed Capital

Seed capital is an essential element for startups, allowing them to get on their feet and pay for the necessary initial costs. It is usually contributed by angel investors, family members or venture capitalists and can cover items like staff recruitment & product prototyping or developing a website.

A Scenario : Understanding Seed Capital

John has a passion for software engineering and has aspired to be an entrepreneur. He came up with a unique application concept that could revolutionize the personal finance industry. After months of effort, he has now created a prototype of his app and is eager to demonstrate it.

John soon understands that he needs additional funds to get his venture up and running. He needs to bring in a team, develop the app, and get the word out about it. His assessment is that he requires around $500,000 for everything to be operational.

John was determined to present his idea to a group of angel investors. To ensure that his pitch was well prepared, he put in countless hours into creating a business plan and financial model. He also took the time to go over his presentation multiple times, making sure he could deliver it effectively.

Impressed by John’s app idea & passion, the angel investors decide to invest $500,000 as seed capital in exchange for a 20% stake in his company on the day of the pitch.

Thanks to the start-up capital, John was able to make his business dreams a reality. He brought together a skilled team and developed an app that gained the interest of potential customers who quickly became paying customers. In due time, the business flourished and was able to attract further investment from other investors.

In this scenario, Seed capital proved to be incredibly instrumental in John launching his business and creating his app. He would not have had the resources necessary to begin without it, and as a result, he could not have marketed it effectively and engage customers.