Seed Money

Subject – Economy

Context – IIT-M incubated Aerostrovilos raises ₹3.5 cr seed fund from TI

Concept –

Seed money, sometimes known as seed funding or seed capital, is a form of securities offering in which an investor invests capital in a startup company in exchange for an equity stake or convertible note stake in the company.
The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own (see cash flow), or until it is ready for further investments.
Seed money options include friends and family funding, seed venture capital funds, angel funding, and crowdfunding.
Seed money can be used to pay for preliminary operations such as market research and product development.
Seed funding is generally one of the first steps investors offer to get startups on their feet before they become fully operational.
Seed funding involves a higher risk than normal venture capital funding since the investor does not see any existing projects to evaluate for funding.

Difference in seed capital and venture capital–

Seed capital can be distinguished from venture capital.

Venture capital investments tend to come from institutional investors,
- involve significantly more money,
- are arm’s length transactions,
- involve much greater complexity in the contracts and corporate structure accompanying the investment.